Swiss Financial Regulator Proposes New Guidelines for Stablecoin Issuers
In a bid to enhance regulatory oversight and manage financial risks, the Swiss Financial Market Supervisory Authority (FINMA) has introduced fresh guidelines for stablecoin issuers. The proposal comes amidst growing concerns regarding the potential impact of stablecoins on regulated entities and the wider financial landscape.
According to a recent directive, FINMA aims to categorize stablecoin issuers as financial intermediaries, underscoring the heightened risks associated with money laundering, terrorist 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 witnessed a surge in adoption. Nevertheless, their rapid proliferation has raised global regulatory apprehensions due to potential illicit activities and misuse.
Addressing financial and reputational risks
In its guidance released on July 26, FINMA stressed that stablecoin issuers must adhere to the same Anti-Money Laundering (AML) obligations as traditional financial institutions. This involves verifying the identity of stablecoin holders and confirming the identity of beneficial owners.
“The stablecoin issuer is therefore deemed a financial intermediary for Anti-Money Laundering legislation and must, among other things, confirm the identity of the stablecoin holder as the customer according to the relevant obligations (Art. 3 AMLA) and establish the identity of the beneficial owner (Art. 4 AMLA),” stated FINMA.
Framework for default guarantees
Aside from AML compliance, FINMA outlined how stablecoin issuers could function without a banking license if they meet specific criteria. It asserts that these criteria ensure the protection of depositors, with issuers required to have a bank guarantee in case of default.
According to FINMA, the framework establishes minimum standards for default guarantees, mandating issuers to inform customers, adhere to guarantee limits, and enable immediate claims in the event of insolvency without the need for a loss certificate.
Boosting depositor protection
While FINMA maintains that its measures enhance depositor protection, they do not equate to the security provided by a banking license. Nonetheless, the regulator is dedicated to mitigating default guarantee risks and ensuring that stablecoin issuers adhere to stringent standards to safeguard customers.
The stablecoin sector has witnessed exponential growth in recent years, achieving an unprecedented market capitalization in 2023. Consequently, global regulators are rushing to establish guidelines for this rapidly evolving industry.
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.
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