1. Regulatory Classification of Stablecoins

The Guidance clarifies the regulatory status of stablecoins that are intended to be used as a means of payment by being pegged to one or more underlying assets, mainly fiat currencies. Such stablecoins are typically representing a payment claim linked to the underlying asset(s) to which they are pegged and qualify as follows according to the Guidance:

1.1 Deposits

If the underlying asset(s) to which stablecoins are pegged are held for the account and the risk of the issuer, such stablecoins typically qualify as deposits under the Swiss banking regulation. As a consequence, issuers of such stablecoins typically require a license as bank pursuant to article 1a of the Swiss Banking Act (the Banking Act) or, subject to certain limitations, as a FinTech license holder pursuant to article 1b of the Banking Act, unless the relevant stablecoins are exempted from the deposit definition pursuant to article 5 paras. 2 et seq. of the Swiss Banking Ordinance (the Banking Ordinance). In practice, issuers rely often on the exemption for deposits guaranteed by a Swiss bank providing a default guarantee pursuant to article 5 para. 3 let. f of the Banking Ordinance (see section 2 below). If such an exemption applies, stablecoin issuers are only subject to the Swiss Anti-Money Laundering Act (AMLA) and, instead of being subject to a FINMA licensing, they have to affiliate themselves with a self-regulatory organization as financial intermediaries pursuant to the AMLA (see section 3 below).

1.2 Collective Investment Schemes

If the underlying assets to which stablecoins are pegged are held for the account and the risk of the stablecoin holder (no issuer counterparty risk), such stablecoins typically qualify as units of collective investment schemes due to the possibility of redemptions. As a consequence thereof, these stablecoins would be subject to the requirements of the Swiss Collective Investment Schemes Act (CISA). In addition, issuers are subject to the Swiss anti-money-laundering regulation (see section 3 below).

2. Requirements for default guarantees of Swiss banks

The Guidance establishes the following minimum requirements for default guarantees of Swiss banks provided in respect of stablecoin issuers as means for issuers to avoid a license requirement under the Banking Act by relying on an exemption from the deposit definition pursuant to article 5 para. 3 let. f of the Banking Ordinance:

1. A default guarantee has to provide an individual claim to each customer in a bankruptcy event of a stablecoin issuer and the customers need to be informed about the default guarantee.

2. A default guarantee must cover at least the total amount of all deposits (i.e. the total amount of the claims that holders of stablecoins have against the relevant issuer).

3. In line with the minimum cover (see (2) above), the total amount of deposits accepted must not exceed the guaranteed amount under a default guarantee.

4. The ability of depositors (e.g. holders of stablecoins) to exercise the guarantee in an uncomplicated and fast manner must not be impeded by formal or material requirements under a default guarantee.

5. Defenses and objections by the guaranteeing bank are permitted in the default guarantee, provided that they arise by law and they are not added as a result of the guarantee agreement.

The Guidance further clarifies that the above-mentioned requirements apply in a technology-neutral manner in general to default guarantees of Swiss banks pursuant to article 5 para. 3 let. f of the Banking Ordinance. Moreover, the Guidance points out that the provision of default guarantees creates legal, reputational and operational risks for the relevant banks that should be adequately addressed.

3. Anti-Money Laundering Rules applicable to Stablecoin Issuers

In line with FINMA's established practice for issuers of tokens that are used for a payment purpose, the Guidance confirms this practice by stipulating that stablecoin issuers are financial intermediaries that fall within the scope of the AMLA. In addition, FINMA identifies that the use of stablecoins is linked to increased risks of money laundering, terrorist financing and the circumvention of sanctions.

Against this background, the Guidance stipulates that stablecoin issuers generally are required to adequately verify the identity of all persons holding their stablecoins. This obligation includes not only the first holders but also subsequent holders who acquired stablecoins on the secondary market. Moreover, as regards the issuance of stablecoins by supervised institutions, the Guidance requires issuers to implement contractual and technical transfer restrictions to avoid anonymous transfers of stablecoins.