Fiat-backed stablecoins

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In the dominant model an issuer holds reserves of fiat currency and short-dated government securities and issues tokens against them one for one. Holders who satisfy the issuer's onboarding requirements may redeem tokens for fiat at par. Secondary holders, who are most of the market, have no direct relationship with the issuer and rely on arbitrage by the primary holders to keep the market price at par.

The legal analysis under Swiss law starts with the Banking Act. FINMA's 2019 supplement treated a token that gives its holder a claim to redemption in fiat currency at a fixed value as a deposit, because the issuer is accepting money from the public and promising to repay it. Deposit-taking from the public requires a banking licence under Art. 1a BankA, or a fintech licence under Art. 1b BankA if the total does not exceed CHF 100 million and the funds are neither invested nor bear interest.¹ The Swiss market responded by having stablecoins issued by licensed banks or by having issuers obtain a bank guarantee for the redemption claim, which under Art. 5 para. 3 lit. f of the Banking Ordinance removes the deposit characterisation.

FINMA Guidance 06/2024 of 26 July 2024 criticised the guarantee construction sharply. FINMA observed that holders of a guaranteed stablecoin have no customer relationship with the guaranteeing bank, that the bank's AML duties toward the ultimate holders are unclear, and that the guarantee may fail in practice because the bank's exposure is capped while the stablecoin's supply is not. It set out minimum requirements for any guarantee it will accept: the guarantee must cover at least the full amount of all outstanding tokens plus a margin, each holder must have a direct claim against the bank, and the issuer must identify every holder in the same way as a bank identifies its depositors.² The last requirement is the one that bites. A Swiss issuer that must identify every holder cannot operate a freely transferable stablecoin at all, and the guidance has in practice confined Swiss franc stablecoins to closed-loop and institutional use.

The Federal Council has since moved toward a dedicated statutory regime. Its consultation on amendments to the financial market acts, which introduces licence categories for "payment instrument institutions" and "crypto institutions", was open in the first half of 2026 and would, if enacted, give stablecoin issuers a licence of their own below the banking licence.³

Singapore's approach began from the e-money definition and arrived at a bespoke framework. On 15 August 2023 MAS published its final regulatory approach for single-currency stablecoins (SCS) pegged to the Singapore dollar or to any G10 currency and issued in Singapore. The framework requires reserves held in cash, cash equivalents or three-month government debt of the reference currency, valued daily at not less than 100 per cent of the tokens in circulation, held with regulated custodians and segregated from the issuer's own assets. The issuer must hold base capital of the higher of S$ 1 million or 50 per cent of annual operating expenses, must redeem at par within five business days of a request, and must publish a white paper and monthly independent attestations of the reserve. Only an issuer that meets these conditions may call its token an "MAS-regulated stablecoin".⁴

The framework required legislation to be implemented, and MAS published draft amendments to the Payment Services Act for consultation in 2025. The author's understanding at the cut-off date is that the legislation had not yet entered into force, so that SCS issuers continued to operate under the existing e-money or DPT regimes with MAS's framework as a published expectation.

Notes

1. Banking Act, SR 952.0, Art. 1a (banks) and Art. 1b (persons under Art. 1b, the fintech licence, with the CHF 100 million ceiling), as amended by the Federal Act of 15 June 2018, AS 2018 5247, in force 1 January 2019. Part E, Chapter II. ↩
2. FINMA Guidance 06/2024 of 26 July 2024 on stablecoins (FINMA-Aufsichtsmitteilung 06/2024), sections 2 to 4 (risks of the default guarantee construction; minimum requirements; AML duties of the issuer toward every holder). Part E, Chapter VII. ↩
3. Federal Council, consultation on the amendment of the Banking Act and the Financial Institutions Act to regulate stablecoins and crypto-asset service providers, opened in late 2025 (SIF fact sheet "Stablecoins"). The consultation proposed new categories of payment instrument institution and crypto institution. Part C, Chapter VI and Part E, Chapter VII. ↩
4. MAS, Response to Public Consultation on Proposed Regulatory Approach for Stablecoin-Related Activities, 15 August 2023, sections 3 to 7 (reserve composition and valuation; capital; redemption at par within five business days; disclosure; the "MAS-regulated stablecoin" label). Part K, Chapter VI. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of October 2026.