Switzerland, known for its innovative financial industry, is facing a new controversy regarding regulating stablecoins. FINMA (Financial Market Supervisory Authority) has recently proposed new guidelines to regulate stablecoin issuers.
Growth Of Stablecoins Has Caught Regulators’ Attention
FINMA Publishes Guidance To Combat Heightened Risks Of Stablecoins –
The Swiss Financial Market Supervisory Authority FINMA has published guidance on the issuance of stablecoins.
Further drawing attention to the increased risks in the area of money laundering, Switzerland’s…— The Industry Spread (@industryspread) July 30, 2024
Stablecoins have gained popularity in recent years. Per Coingecko, three of the top 20 digital assets are stablecoins, pegged to the USD (USDT, USDC & DAI). Also on Coingecko, the stablecoin category holds a combined $164 billion market cap, making it the number 11 category by market cap.
However, their parabolic growth has raised regulatory concerns on a global scale.
The main issue for regulators is that fiat currency-pegged tokens are increasingly being used for money laundering and financing terrorism.
FINMA’s proposal seeks to classify stablecoin issuers as financial intermediaries to combat these concerns. This will mean that issuers must adhere to the same anti-money laundering obligations as traditional financial institutions.
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Stablecoin Holders Will Be Required To KYC, Inevitably Losing Anonymity
According to the new guidelines, issuers will need to verify the identity of holders and establish the identity of beneficial owners.
Additionally, FINMA requires these crypto issuers to have bank guarantees in case of default, to protect depositors. These measures aim to enhance depositor protection and mitigate financial and reputational risks associated with stablecoins.
Seems like a big deal for stablecoins.
The Swiss financial regulator, FINMA, says that the identity of anyone holding a stablecoin must be "adequately verified by the issuing institution."
So the KYC-lite model that stablecoins have relied on till now won't fly in Switzerland. pic.twitter.com/LgRB0Oa3U3
— John Paul Koning (@jp_koning) August 2, 2024
FINMA is making it clear that these measures are being put in place to protect investors but even so, they are not being well received.
Some players in the crypto sector believe these requirements could slow innovation and the growth of the digital asset sector in Switzerland.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
