According to a notification issued by FINMA, the regulator has confirmed that stablecoins will be treated just like any other blockchain-based token in Switzerland, September 11, 2019. The Libra Association requested FINMA to disclose how the network would be treated, and the regulator has stated that Libra will be classified as financial infrastructure.
Technology Neutral Regulation
After witnessing the reaction of different countries to both Libra and cryptocurrencies in general, Switzerland’s approach to regulating Libra is incredibly refreshing. Seeing a major country harness the power of technological innovation and not shun it based on inconsistent agendas is truly noble.
The Swiss financial market regulator classifying stablecoins on par with other blockchain tokens is not surprising. They come with a lot of the same risks and do not have a peg that is 100 percent certain to survive. In the notification, they clearly mention that the regulation applying to each stablecoin might differ based on what asset is backing it.
This means that USDC, which is backed by USD, and DAI, which is backed by nothing, might fall into different categories of supervision.
A query from the Libra Association ended with a little more clarity as to how this could all go down. Libra has been classified as financial infrastructure by FINMA and will require a payments license before commencing operations.
By default, Libra will be categorized as a payment system and subjected to anti-money laundering (AML) guidelines. Any new features will require regulatory approval before being rolled out, and as a payment system issuing a native token, there will be additional regulatory measures that Libra will have to abide by.
Positive Outlook for Libra?
After a couple of months of being roughed by American regulators, Libra seems to have chosen their country of incorporation wisely. Switzerland has become a prime destination for blockchain and cryptocurrency businesses. They were one of the first countries to issue formal guidance for security tokens.
Libra caught flak from the United States Treasury once again, with Secretary of Treasury for Terrorism and Financial Intelligence, Sigal Mandelker, stating that Libra will only be allowed to launch if they introduce robust AML procedures.
Mandelker urged Switzerland to hold Libra accountable for money laundering and impose regulations on them. Switzerland’s classification of Libra is reasonable, and requiring them to implement AML precautions was expected. Things are finally looking slightly positive for Facebook and the Libra Association.