91����ԭ��

Facing strong opposition from the country’s blockchain industry, the Swiss Financial Market Supervisory Authority (FINMA) has told 91����ԭ�� that it stands by its latest guidance on stablecoin issuance.

Under new guidance issued by FINMA, Swiss stablecoin issuers are expected to obtain know your customer (KYC) information on all holders of their stablecoins.

This applies not only to customers receiving or redeeming stablecoins directly from the issuer, but also to intermediate stablecoin holders that have no direct interaction with the issuer.

Under the guidance, any stablecoin holder at any point in the chain of transactions is defined as a “client” of the issuer.

For anti-money laundering (AML) purposes, issuers are therefore obliged to identify these holders and monitor their transactions.

In a statement published earlier this month, the Swiss Blockchain Federation said the rules will subject local stablecoin issuers to an “impossible” compliance burden that will render their product “unviable” in the Swiss market.

“The comprehensive identification of all users demanded by FINMA has no recognisable legal basis,” the federation said. “FINMA’s requirements make it impossible for Swiss issuers to issue competitive stablecoins.”

Speaking with 91����ԭ�� over the past week, FINMA spokesperson Patrizia Bickel responded to the federation’s criticism of the new guidance.

According to Bickel, the latest guidance “does not seek to change” the previous requirements that were imposed on stablecoin issuers under the .

She pointed to Articles 3 and 4 of the AMLA, which state that a “financial intermediary” must identify the “beneficial owner” when establishing a “business relationship” with a customer.

“This prevents stablecoins from circulating as anonymous accounts or bearer instruments, which would not meet the requirements of AML law,” said Bickel.

“The application of the requirements of AML law to stablecoins is a consistent implementation of the principle of technological neutrality: ‘same business, same risks, same rules’.”

In a written response shared with 91����ԭ��, Luzius Meisser, board member at the Swiss Blockchain Federation, and Hans Kuhn, a partner at Lawside KLG, disagreed with Bickel’s characterisation of the guidance.

Both Meisser and Kuhn said that FINMA’s guidance fails to ensure technological neutrality as intended, due to the regulator’s false equivalence between stablecoins and bank accounts.

“The principle of technology-neutral regulation requires that apples are compared with apples,” they said.

“FINMA thinks holding a stablecoin is the same as having a bank account, though the proper analogy is not bank accounts but bank notes.”

As per Articles 3 and 4 of the AMLA, when a customer pays using bank notes, ID verification (if not already obtained) is required only if the transaction is of “considerable financial value”.

The same applies if multiple cash transactions that appear to be connected are also of “considerable financial value”.

What is really new in the guidance?

Bickel added that FINMA had already clarified its stablecoin rules in previous  published in 2019 and in its .

The latest guidance does not contradict or diverge from what was already published, she said, but does add certain new requirements.

However, the new requirements that have been added are not the ones that the Swiss Blockchain Federation opposes.

For example, the latest guidance summarises and sets out the requirements for banks offering default guarantees to stablecoin issuers.

These requirements aim to ensure that, if a Swiss stablecoin issuer goes bankrupt, for example, holders of its stablecoin are not left out of pocket.

Once again, however, Meisser and Kuhn rejected Bickel’s claim that the elements of the guidance that they oppose were already spelled out in previous statements.

“The practice summarised in the guidance represents a significant tightening compared to the previous practice,” they said.

They added that although FINMA did provide information on the issuance of stablecoins by supervised institutions in its 2021 annual report, thes rules were limited in scope.

“While it is correct that FINMA already demanded that every holder of a stablecoin must be identified before, it limited that requirement to directly supervised entities such as banks,” they said.

“FINMA has even issued non-action letters to some non-bank issuers, confirming that they only need to identify the counterparty on issuance and redemption, but not in between.

“We consider this a change in practice,” they added.

Similarly, Meisser and Kuhn argue that the application of the latest guidance to self-regulatory organisations (SROs) is also a new addition.

“We are aware of two non-action letters in which FINMA did not take this view,” they said.

In response, Bickel pointed to previous  indicating that “financial intermediaries” that are not supervised by FINMA directly “must” become members of an SRO to be in compliance with AML law.