The Swiss Financial Market Supervisory Authority (FINMA) has proposed new guidelines for stablecoin issuers in an effort to enhance regulatory oversight and reduce financial risks. This proposal is a response to the increasing concerns surrounding stablecoins and their potential impact on regulated institutions and the financial ecosystem.
According to FINMA’s recent guidance document, stablecoin issuers are to be classified as financial intermediaries due to the elevated risks associated with activities such as money laundering, terror funding, and sanctions evasion that are linked to these digital assets. Stablecoins, which are digital assets tied to the value of traditional currencies or other assets, have gained popularity in recent years. However, their rapid growth has raised global regulatory concerns regarding potential illicit activities and misuse.
To address 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.
In addition to AML compliance, FINMA outlined that stablecoin issuers can operate without a banking license if they meet specific conditions. These conditions aim to protect depositors, requiring issuers to have a bank guarantee in case of default and to adhere to minimum requirements for default guarantees.
While FINMA’s measures are designed to enhance depositor protection, they do not offer the same level of security as a banking license. Nevertheless, the regulator is dedicated to mitigating default guarantee risks and ensuring that stablecoin issuers adhere to strict standards to safeguard customers.
The stablecoin sector has seen significant growth in recent years, with an unprecedented market capitalization in 2023. As a result, global regulators are working swiftly to establish guidelines for this rapidly developing 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.
Overall, the proposal by FINMA represents a proactive step towards regulating stablecoins and ensuring the stability and security of the financial system amidst their increasing popularity and usage.