Swiss Regulator FINMA publishes Guidance for Stablecoin Issuers

The Swiss Financial Market Supervisory Authority (FINMA) has today published comprehensive new guidance regarding the issuance of stablecoins.

According to an article by the Swiss financial watchdog, FINMA discusses associated risks, default guarantees, and FINMA's stablecoin regulation approach. The Swiss regulators also draw attention to increased risks associated with money laundering.

Projects aiming to issue stablecoins have grown in significance in Switzerland in recent years. Typically, their aim is to offer a blockchain-based payment method with minimal price fluctuations. FINMA has already responded to inquiries concerning the legal framework that will govern initial coin offerings (ICOs) beginning in September 2019, the post added.

In addition, regarding stablecoin projects and how they affect the supervised institutions, FINMA addresses various aspects of financial market law in the guidance. FINMA highlights the elevated risks related to money laundering, financing of terrorism, and sanctions evasion in relation to stablecoin projects. They also put the entire Swiss financial center's reputation in danger.

According to FINMA's post, many Swiss stablecoin issuers rely on bank default guarantees, which means that they frequently do not require a license from FINMA in compliance with banking regulations. Both the stablecoin holders and the banks offering the guarantee are at risk as a result of this. Furthermore, in order to safeguard depositors, FINMA divulges information regarding its minimal requirements for default guarantees. These hold true for stablecoins as well, the post added.

A number of the Swiss banks' money laundering risk analyses did not meet the minimum standards, according to FINMA's review of over thirty of them conducted this spring. The review came after numerous flaws were found during on-site examinations. Inadequate definitions of risk tolerance and the absence of structural components necessary for risk analysis were among the issues.

Switzerland is among the many countries around the world that are welcoming the asset class and appreciating the innovation in cryptocurrency. The Swiss government opened up a public comment earlier this year in May in an effort to establish globally recognized guidelines for cryptocurrency taxation. The European nation plans to implement rules for tax reporting on digital assets in order to "ensure equal treatment" as traditional assets.

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