FINMA Issues New Guidance on Stablecoin Issuers

Share IT

Key Takeaways:

  • FINMA’s guidance mandates that stablecoin issuers must verify the identity of all token holders to mitigate money laundering risks 
  • New guidelines classify stablecoin issuers as financial intermediaries, 

The Swiss Financial Market Supervisory Authority (FINMA) has introduced new guidance aimed at strengthening the regulatory framework for stablecoin issuers. This move is part of Switzerland‘s ongoing efforts to address the potential risks associated with stablecoins, particularly those pegged to fiat currencies. 

The guidance underscores the importance of verifying the identity of all stablecoin holders to mitigate risks such as terror funding, sanctions evasion, and reputational damage to the Swiss financial sector.

FINMA’s guidance mandates that stablecoin issuers be classified as financial intermediaries under anti-money laundering (AML) legislation. This classification requires issuers to verify the identity of stablecoin holders and establish the identity of beneficial owners. By ensuring strict compliance with AML obligations, FINMA aims to prevent the misuse of stablecoins for illegal activities and enhance the overall security of the Swiss financial system.

To protect depositors, the guidance sets stringent requirements for default guarantees provided by banks backing stablecoins. These include:

  • Issuers must ensure that the deposits do not exceed the guarantee limits.
  • Customers must have a direct claim against the guaranteeing bank.
  • The guarantee must cover the full amount of deposits and interest.
  • In case of insolvency, customers should be able to make immediate claims without waiting for a certificate of loss.

FINMA’s guidance builds upon its initial note from 2019, introducing comprehensive measures to ensure the integrity and trustworthiness of stablecoins. Key requirements include implementing know-your-customer (KYC) protocols, contractual transfer restrictions, and blockchain controls. 

These measures aim to prevent stablecoins from being transferred to or used by individuals or entities involved in illegal activities.

The guidance also outlines conditions under which stablecoin issuers can operate without a banking license, provided they meet specific criteria to ensure depositor protection. These conditions include maintaining a bank guarantee and informing customers about the guarantees and limitations.

The new laws provided a legal foundation for blockchain and digital currency for the first time. 

They defined the exchange of digital securities, detailed the legal procedures for seizing digital assets in bankruptcy, and outlined the responsibilities of trading exchanges regarding AML policies and other compliance measures. These laws took effect in February 2021.

Share IT
Aadrika Sharma
Aadrika Sharma

I enjoy writing and try to learn new things every passing day!

Get Daily Updates

Crypto News, NFTs and Market Updates

Can’t find what you’re looking for? Type below and hit enter!