The Swiss Blockchain Federation (SBF) welcomes the planned revision of the Financial Market Infrastructure Act (FinfraG) and has submitted important comments as part of the consultation process. As the leading public-private partnership for the promotion of Switzerland as a blockchain location, the SBF sees the modernization of the FinfraG as a decisive step towards securing the competitiveness of the Swiss financial center and promoting the use of distributed ledger technologies (DLT).
In its consultation, the SBF highlights seven key points:
Positive assessment of the revision: the SBF expressly praises the careful review and structuring of the revision. It emphasizes that the revision is a necessary step to eliminate existing uncertainties. The SBF suggests that such systematic reviews should also be carried out regularly in the future in order to take into account the dynamics of technological developments in the financial market infrastructure.
Lack of definitions: The SBF proposes that clear and binding definitions for the terms “central securities depository” and “payment system” be enshrined in the law. These terms are currently so broad that they could theoretically affect almost any custodian or bank. A narrower definition could lead to greater legal certainty and prev
Rule of law principles: The SBF’s proposal provides for the legislator to establish clear and comprehensible criteria for the applicability of the FinfraG. Although the thresholds proposed in the draft revision provide guidance, the SBF believes that they are not sufficient. Instead, it calls for detailed guidelines on the application of the law in order to uphold the principle of legality.
Lack of future orientation: The SBF criticizes the fact that the draft revision focuses too strongly on existing structures and does not take sufficient account of future developments in the area of distributed ledger technologies (DLT). The SBF proposes that the principle of technology neutrality be clearly anchored in the law and that the future integration of trading and post-trading activities be expressly permitted in order to exploit innovation potential.
Strengthening the DLT trading system: In order to catch up with the implementation of DLT trading systems, the SBF calls for the licensing requirements for these systems to be simplified and accelerated. In addition, cooperation between the Swiss Financial Market Supervisory Authority FINMA and the companies concerned should be improved in order to remove obstacles in the approval process.
Slow licensing procedures: The SBF proposes integrating best practice approaches from the EU Regulation on Markets in Crypto Assets (MiCAR) into Swiss law in order to increase the efficiency of authorization procedures. For example, tighter deadlines and clearer requirements for the authorities could be introduced in order to shorten processing times.
Deregulation check: The SBF calls for a systematic review of unnecessary or obstructive regulations to be carried out as part of the revision of the law. Provisions that have proven to be superfluous or even counterproductive in practice should be deleted.
With these proposals, the Swiss Blockchain Federation is advocating future-oriented and innovation-friendly legislation that positions Switzerland as a leading blockchain location worldwide.
The Swiss Blockchain Federation’s comprehensive statement on the consultation (in German only) can be found at the following link: https://bit.ly/finfra_sbf
The Swiss Blockchain Federation is concerned about the supervisory communication from the Swiss Financial Market Supervisory Authority FINMA on stablecoins. The comprehensive identification of all users demanded by FINMA has no recognizable legal basis. FINMA’s requirements make it impossible for Swiss issuers to issue competitive stablecoins. In addition, the announcement came as a surprise and without consulting those affected.
Bern, 13 August 2024 – On 26 July 2024, FINMA published the supervisory communication “Stablecoins: Risks and requirements for stablecoin issuers and guarantee-issuing banks” (06/2024), which has caused unrest and criticism in the blockchain industry, as FINMA is going far beyond previous practice, which has also been criticized by the industry.
In this supervisory communication, FINMA expresses the view that issuers of stablecoins are obliged to register all holders of stablecoins as clients and to monitor their transactions. Stablecoins are electronic means of payment. The established practice for means of payment is to check the counterparty only at the time of issue and redemption. In a departure from this practice and international custom, FINMA now construes the existence of a claim between the stablecoin holder and the stablecoin issuer as a “permanent business relationship” and therefore a client relationship under the Anti-Money Laundering Act. This means that all persons in possession of stablecoins must be identified by the issuing institution or appropriately supervised financial intermediaries by means of a verified passport copy or other official documents.
In the opinion of the Swiss Blockchain Federation, such a requirement cannot be derived from the current Anti-Money Laundering Act. Classifying the temporary holding of a stablecoin as a “permanent business relationship” with the issuer goes far beyond what would be justifiable according to the meaning and purpose of the relevant regulations. In this respect, FINMA does not have a sufficient legal basis for its practice.
FINMA’s interpretation of the legal framework for money laundering goes significantly further than what is required by international standard setters and other countries. Neither the European Union nor Singapore, Hong Kong, Japan or the USA require the identification of all intermediate holders of a stablecoin or a restriction on its transferability. The Financial Action Task Force (FATF) – the most important international body for money laundering regulations – does not require this either. There are good reasons for this: Stablecoins, which can only be transferred between clients of a single institution, are unsuitable as a means of payment and therefore useless.
If this FINMA practice were to prevail, the issuance of stablecoins from Switzerland would effectively be made impossible because the restrictions communicated by FINMA would not allow for a viable business model. Swiss issuers of stablecoins are therefore forced to realize their project abroad. If they implement it in a member state of the European Union, they are subject to regulation tailored to this use case and can freely offer the stablecoin throughout the European Economic Area. In addition, they can also distribute the stablecoin in Switzerland without any restrictions, provided they do not have a permanent physical presence in Switzerland and, in particular, do not employ any staff.
Finally, the SER is disconcerted that FINMA has waived its statutory participation rights (Art. 7 para. 4 FINMASA) and that those directly affected have not been consulted. The SER has been advocating a constructive dialog with the authorities for years with the aim of ensuring the long-term stability of the financial centre and strengthening the pioneering role, competitiveness and future viability of Switzerland as a blockchain location.
What are stablecoins?
In order to exploit the potential of applications based on distributed ledger technology, digital means of payment are needed that enable transactions in an official currency such as the Swiss franc, the euro or the US dollar. Stablecoins are digital currencies that are backed by deposits or financial instruments in the corresponding official currency and therefore have a more or less stable value against the reference currency. In contrast to cryptocurrencies, which are unsuitable for transactions in official currencies due to their strong price fluctuations, stablecoins play a central role in decentralized finance and many other blockchain applications.
Bern, 21.12.2023 – The Swiss Blockchain Federation (SBF) welcomes the announcement by the Swiss Financial Market Supervisory Authority (FINMA), which has clarified how staking services for cryptocurrencies are to be handled under financial market law. An announced change in practice had caused uncertainty and strong criticism in the industry.
The Swiss Blockchain Federation’s commitment and willingness to engage in dialogue have now borne fruit. The SBF published a circular on the topic of staking, issued a high-profile media release together with the Crypto Valley Association opposing FINMA’s planned regulation of staking services, pointed out the potential competitive disadvantages of Switzerland as a business location, organised two round tables with all key industry representatives and took part in two exchange meetings with the Swiss Financial Innovation Desk (FIND) and FINMA.
After months of hard work and discussions, a compromise is now on the table that guarantees legal certainty for the players and Switzerland as a blockchain location. FINMA’s requirements for recognising staked assets as safe custody assets (client consent, risk disclosure, clear allocation, BCM) are reasonable and correspond to the status quo for professional service providers. The special issues in connection with custody chains are justified. Finally, it is positive that regulated service providers (SROs) can continue to operate.
We would like to thank everyone who contributed to this positive result!
