The Swiss Financial Market Supervisory Authority (FINMA) has introduced new proposed guidelines for stablecoin issuers in an effort to strengthen regulatory oversight and reduce financial risks. This move comes as concerns grow regarding the potential impact of stablecoins on regulated institutions and the overall financial system.
According to a recent guidance document, FINMA aims to classify stablecoin issuers as financial intermediaries due to the heightened risks associated with money laundering, terrorism financing, and sanctions evasion linked to these digital assets. Stablecoins, which are digital assets tied to the value of traditional currencies or other assets, have seen a surge in adoption. However, their rapid growth has raised global regulatory concerns regarding potential illicit activities and misuse.
Addressing these financial and reputational risks, FINMA emphasized in its guidance issued on July 26 that stablecoin issuers must comply with Anti-Money Laundering (AML) obligations similar to traditional financial institutions. This includes verifying the identity of stablecoin holders and identifying beneficial owners.
Furthermore, FINMA outlined that stablecoin issuers can operate without a banking license if they meet specific conditions, such as having a bank guarantee in case of default. The framework sets minimum requirements for default guarantees, ensuring depositors are protected by informing customers, adhering to guarantee limits, and enabling immediate claims in case of insolvency without the need for a certificate of loss.
While FINMA’s measures aim to enhance depositor protection, they do not provide the same level of security as a banking license. Nonetheless, the regulator is committed to reducing default guarantee risks and ensuring that stablecoin issuers adhere to stringent standards to safeguard customers.
The stablecoin sector has witnessed significant growth in recent years, reaching an unprecedented market capitalization in 2023. In response, regulators worldwide are swiftly establishing guidelines for this rapidly evolving sector. According to the “PwC Global Crypto Regulation Report 2023,” at least 25 countries, including Switzerland, had implemented stablecoin regulations or legislation by the end of the year.
In a related article, “Unstablecoins: Depegging, bank runs, and other risks loom,” the potential risks associated with unstable stablecoins are explored.