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Switzerland’s New Stablecoin Guidelines: 3 Things You Should Know

The Swiss Financial Market Supervisory Authority (FINMA) issuednew guidelines for stablecoins added as a supplement to its existing guidelines for initial coin offerings (ICOs) to outline how stablecoins are treated under the Swiss supervisory law.

FINMA announced on Wednesday that stablecoins are classified under the existing approach of blockchain-based tokens. The regulatory framework for stablecoins may differ depending on their underlying assets that they are backed by, including currencies, commodities, real estate, and securities.

The outline focuses on the economic function and purpose of the token, with an emphasis on that the same risks and same rules apply. FINMA stated:

“The concrete design of ‘stable coins’ can vary greatly in legal, technical, functional, and economic terms. Therefore, no fully generic classification is possible. Money laundering, securities trading, banking, fund management, and financial infrastructure regulation can all be of relevance.”

FINMA’s approach to Libra

Regarding Facebook’s Libra, FINMA announced that the services provided by the Libra project would require a payment system license based on Switzerland’s Financial Market Infrastructure Act (FMIA).

“Due to the issuance of Libra payment tokens, the services planned by the Libra project would clearly go beyond those of a pure payment system and therefore be subject to such additional requirements.”

FINMA indicates that the Swiss payment system license would allow for a combination of banking and infrastructure regulatory provisions and that the conditions for Libra being granted a license would include:

“The returns and risks associated with the management of the reserve were borne entirely by the Libra Association and not — as in the case of a fund provider – by the ‘stable coin’ holders.”

An internationally coordinated approach would be ideal for Libra to establish the requirements of its reserve management, governance, and AML system.

Facebook’s Libra Could Do to the Payment Sector What Elon Musk's SpaceX Did to the Space Industry, Binance Research Reveals

Libra has released its updated whitepaper, marking several significant changes towards providing individual stablecoins for major fiat currencies, including USD, EUR, GBP, and Libra Coin.

Binance took a closer look at Libra’s recent whitepaper update and concluded that Facebook’s project could potentially disrupt the payment industry.

Taking into account that the Libra Association recently applied to the Swiss Financial Market Supervisory Authority FINMA for a payment system license, Binance stated that such a payment system may very likely qualify as being “systemically important.” By applying for the payment system license, the Libra payments system would be accessible to the public.

There is an advantage of issuing widely-available programmable currency, which could lead to efficiency gains. As an optimistic comparison, Binance added, “Libra’s envisioned global payment system could do to the payment industry what SpaceX did to the space industry: shake the foundations of a well-established sector with high entry barriers.

Technology entrepreneur Elon Musk, the founder of SpaceX, was mentioned in the report as an industry leader in the space sector due to its significant step forward in improving speed for rocket journeys.

The report also highlighted that most payment systems are operated by a central bank and of regional scope, as Libra could have an advantage has it could potentially have a wider reach of users. Focusing further on financial inclusion, Binance claims that Libra positions itself as a new financial framework to “enable a simple global currency and financial infrastructure that empowers billions of people.”

One of the major updates of the Libra whitepaper is that it explicitly mentions the limits of what users are able to do on the network, including balance and transaction limits, and the network would only be accessible to regulated crypto firms in the beginning.

Binance suggests that Libra would have to comply with even more stringent criteria laid out by the Bank for International Settlements, after enduring months of regulatory scrutiny from global regulators. Regulating Libra has been difficult in many global institutions,

Recently, the Libra Association has welcomed a new member, Heifer International, a nonprofit organization aimed to tackle world hunger and poverty. The addition of Heifer International brings the tally of members in the Libra Association to twenty-three.

The Libra project joins the trend of many central banks turning to central bank digital currencies (CBDCs) in a time where the birth of coronavirus causes concern for using banknotes. The Central Bank of Argentina (BCRA) is now looking to test a blockchain-based clearing system to be used by the country’s major financial institutions. The aim of the blockchain clearing system is to provide efficiencies for fiat payments and enable them to be more reliable and to provide end-to-end traceability. Sweden’s Sveriges Riksbank announced that it had started testing an e-krona, taking one step closer to the release of a central bank digital currency. The e-krona aims to simulate everyday banking activities, including payments, deposits, and withdrawals from a digital wallet on a mobile phone. The pilot testing program has been scheduled to operate for one year, until February 2021 and will be running on blockchain.

Facebook Calibra Digital Wallet Gets a New Name – Novi

What is Novi?

Facebook has renamed its digital wallet, Calibra, as Novi. Calibra was the digital wallet that the social media giant has been building to access Libra digital currencies.

In a blog post, the company explained that the new name was inspired by the Latin words “novus” and “via,” meaning “new” and “way.” The digital wallet company, a subsidiary under Facebook will now be named Novi Financial.

As previously reported by Blockchain.News, Libra has abandoned its original plan of a widely accessible permissionless digital currency aimed to solve financial inclusion issues, due to ongoing regulatory backlash.

Libra was seen as a controversial project, especially in the eyes of regulators. Libra has then applied for a payment system license from the Swiss Financial Markets Supervisory Authority (FINMA), to be able to allow the Libra payments system to be used publicly.

As stated on Novi’s website, the project is now moving towards providing individual stablecoins for major fiat currencies, including USD, EUR, and GBP. Previously, the Libra stablecoin aimed to be backed by a basket of global currencies, which also included the Singapore Dollar, and Japanese Yen.

Despite changing the name of the digital wallet, Facebook says the mission for both Novi and Libra remains unchanged – enabling the transfer of money as easy as “sending a message.”

A standalone Novi app is a part of the plan, as well as a version where it is integrated with WhatsApp and Facebook Messenger to allow consumers to send money to their contacts easily.

David Marcus, the Co-creator of what was once known as Calibra, now Head of Novi also explicitly mentioned in his tweets, that instead of creating a global, digital currency payment network, the focus has shifted to act as a wallet for stablecoins. Although Libra hopes to work with as many central banks as possible, for jurisdictions whose currency has not been added to Libra’s stablecoin backing will be unable to use it.

Binance’s take on Libra

Binance took a closer look at Libra’s recent whitepaper update and concluded that Facebook’s project could potentially disrupt the payment industry.

Image via Shutterstock

Swiss Market Watchdog Approves First Regulated Crypto Fund for Investors

Switzerland’s financial market watchdog announced that it had approved the first regulated cryptocurrency fund in the country.

The Swiss Financial Market Supervisory Authority (FINMA) disclosed on Wednesday, September 29, that it had granted the launch of the Crypto Market Index Fund, according to Swiss law.

The market regulator further stated that the Crypto Market Index Fund would be restricted to qualified investors investing majorly in cryptocurrencies or digital assets with “sufficiently large trading volume” running on the blockchain or distributed ledger technology.

The FINMA classified under other funds for “alternative investments” with particular risks and stated that it would require investors to invest only through established counterparties based in a member country of the Financial Action Taskforce and are subject to corresponding Anti-Money Laundering regulations.

The Crypto Market Index Fund is launched by Swiss asset management firm Crypto Finance AG and is administered by investment management firm PvB Pernet von Ballmoos AG. At the same time, custody is offered by regulated custodian SEBA Bank AG.

Crypto Finance AG said that the crypto fund would track the performance of the Crypto Market Index 10, a product administered by the Swiss market index under the SIX Swiss Exchange.

“The objective of the Crypto Market Index 10 is to reliably measure the performance of the largest, liquid crypto assets and tokens and to provide an investable benchmark for this asset class,” crypto Finance stated.

Besides that, FINMA has granted SEBA bank permission to provide digital assets to Swiss-domiciled mutual funds.

Announced on Wednesday, FINMA granted SEBA bank a license set to allow the bank to act as a custodian bank and offer liquid investment funds with cryptocurrencies.

SEBA Bank CEO Guido Buehler talked about the development and said that the license would attract more investment.

“This collective investment scheme license allows institutional clients, and then later retail clients, to invest into crypto assets on a liquid basis through fund structures,” Buehler said.

Swiss Crypto Adoption on The Rise

The development by The Swiss Financial Market Supervisory Authority (FINMA) to grant more regulatory approval for cryptocurrency investment instruments not only signals cryptocurrency adoption continues to gain momentum in Switzerland. Still, it marks a milestone for the progressive step towards approving a Crypto ETF in the country.

The Swiss financial market regulator embraces a more flexible approach to cryptocurrency than authorities in several other countries.

As a result, Switzerland is among the leading countries in terms of crypto adoption in Europe.

The FINMA approved many similar asset-oriented products in the recent past, with firms such as CoinShares and 21Shares have unveiled multiple exchange-traded products on the SIX Exchange.

In September 2020, the Swiss authorities started allowing local companies and citizens based in Zug to pay their taxes in either Bitcoin or Ethereum.

This year, FINMA granted permission to the Swiss bourse to develop an exchange dedicated to digital token offerings in mid-September this year.

Overall, Switzerland has been considered as a “crypto valley” s several industry firms are drawn to the jurisdiction over its friendly cryptocurrency and blockchain regulation.