The Swiss Financial Market Supervisory Authority (FINMA) recently released updated guidance on the issuance of stablecoins to address default guarantees, associated risks, and regulatory practices concerning stablecoins. This guidance sheds light on the escalated concerns regarding money laundering in relation to stablecoin activities.

In the evolving landscape of finance, stablecoin initiatives have gained significant traction in Switzerland with the objective of providing secure payment solutions with minimal volatility on blockchain platforms. FINMA had previously addressed these initiatives in its September 2019 addendum to the guidelines on initial coin offerings (ICOs), responding to inquiries about the regulatory framework surrounding ICOs.

The latest guidance delineates the financial market regulations relevant to stablecoin initiatives and their implications for supervised financial entities. It underscores the heightened risks of money laundering, terrorist funding, and sanctions evasion associated with stablecoin operations, which could potentially tarnish the reputation of the Swiss financial industry.

FINMA highlights that many stablecoin issuers in Switzerland rely on default guarantees from banking institutions to avoid the necessity of obtaining a FINMA banking license. However, this practice introduces risks for both the holders of stablecoins and the banks issuing the guarantees. FINMA specifies its criteria for minimum requirements for default guarantees to safeguard depositors, stressing that these criteria extend to transactions involving stablecoins.