Stable coins

The Swiss Financial Market Supervisory Authority (FINMA) has published a supplement to its ICO guidelines regarding stable coins. The supplement outlines how stable coins are treated under Swiss supervisory law and whether a stable coin launch would be subject to authorization.

Stable coins are a type of cryptocurrency whose price volatility is much more limited compared to traditional payment tokens, such as bitcoin. This is to be achieved through an active or automatic monetary policy or a currency basket. The objective of stable coins, to be a stable payment token, increases market acceptance in the financial market, in particular for payment purposes. The question now is how FINMA will treat these stable coins and whether they have different requirements for authorization than traditional cryptocurrencies.

FINMA generally applies the principle of technology neutrality. Therefore, the treatment of stable coins follows the existing approach taken to blockchain-based tokens. The focus is on the economic function and purpose of a Token (“substance over form”). In doing so, FINMA considers already proven decisions based on the “same risk same rules” principle and evaluates the specialties of the individual case. Depending on the stable coin in question, the supervisory consequences may differ. This is mainly because the respective stable coin is based on other assets, such as a currency, a commodity, or any other asset. The legal entitlement of the holder may also lead to other regulatory restrictions under certain circumstances. In addition, there are some points of contact between stable coins and financial market laws in anti-money laundering and securities trading.

Based on this, it is impossible to say specifically how FINMA assesses a particular stable coin. FINMA’s statement on the Libra project can be taken as a reference though. According to FINMA, the coin planned by the Libra Association would be subject to specific requirements in payment systems and ancillary services. Therefore, it would only be permissible with an authorization.