In an effort to bolster regulatory scrutiny and mitigate financial risks, the Swiss Financial Market Supervisory Authority (FINMA) has proposed new guidelines targeting stablecoin projects. This initiative addresses mounting concerns regarding the influence of these projects on regulatory bodies and the wider financial landscape.
Why Are Stablecoins Under Scrutiny?
Stablecoins, which are cryptocurrencies linked to traditional currencies or assets to maintain value stability, have gained traction globally. However, their rapid proliferation has raised alarms about potential misuse in illegal activities. In its latest guidance, FINMA intends to classify stablecoin issuers as financial intermediaries, emphasizing the growing risks of money laundering and sanctions evasion related to these digital assets.
What Are FINMA’s Compliance Requirements?
According to the guidelines released on July 26, stablecoin issuers must adhere to the same Anti-Money Laundering (AML) standards as traditional financial entities. This obligation includes verifying the identities of stablecoin holders and recognizing beneficial owners, as mandated by AMLA Articles 3 and 4. FINMA’s directive underscores the necessity for these issuers to comply with stringent AML protocols to curb illicit activities.
Key Takeaways for Stakeholders
– Stablecoin issuers must verify the identity of holders and beneficial owners.
– Compliance with AML standards is mandatory, similar to traditional financial institutions.
– Issuers can operate without a banking license if specific conditions are met.
– Default guarantees must meet minimum requirements, offering immediate claims in bankruptcy scenarios.
– Global regulatory frameworks are evolving to address the exponential growth of stablecoins.
FINMA also elaborated that stablecoin issuers could function without a banking license if they meet certain conditions to protect depositors. These conditions require issuers to obtain collateral from a bank to cover defaults, ensuring the safeguarding of customer deposits. The framework sets minimum standards for these guarantees, enabling immediate claims in case of issuer bankruptcy.
Despite enhancing depositor protection, these measures do not equate to the security provided by a banking license. Nonetheless, FINMA aims to minimize default risks and ensure stablecoin issuers uphold stringent standards, thus offering a safer environment for customers. As the stablecoin market continues to expand, reaching unprecedented valuations in 2023, global regulators are increasingly focusing on establishing robust guidelines. By the end of 2023, at least 25 countries, including Switzerland, have implemented or proposed regulations for stablecoins, according to the PwC Global Crypto Regulation Report.
