This study investigates how sensor technologies support circular economy (CE) strategies in Switzerland’s metal recycling system and identifies barriers limiting their effectiveness in reuse and remanufacturing. Despite advanced infrastructure and regulatory frameworks mandating domestic waste processing, Swiss CE efforts remain focused on recycling, with limited upstream engagement. A qualitative, exploratory case study based on over 60 secondary sources reveals that sensor technologies are widely used for high-throughput sorting and material recovery but underutilised for functions critical to higher-value CE loops—such as condition monitoring, traceability, and disassembly. The study identifies systemic barriers—regulatory ambiguity, data fragmentation, and economic disincentives—that constrain broader circular outcomes. Strategic opportunities include repurposing sensors for reuse, integrating digital identifiers, and improving cross-actor collaboration. The findings contribute to CE literature by clarifying how technical tools can be repositioned through systemic reform, offering practical guidance for policymakers, industry stakeholders, and researchers seeking to shift from recycling optimisation toward material value retention.