Quantum Updates 60: FINMA Extends OTC Collateral Deadline | November 2025

Switzerland FINMA Extends Transitional Period for Exchange of Collateral in OTC Derivatives Transactions

On 9 October 2025, the Swiss Financial Market Supervisory Authority (FINMA) issued Guidance 04/2025, extending the transitional period for the exchange of collateral in certain over-the-counter (OTC) derivatives transactions by three years—from 1 January 2026 to 1 January 2029. The decision applies to transactions not cleared through a FINMA-authorised or recognised central counterparty, ensuring continued regulatory equivalence and competitive neutrality within global derivatives markets. The extension aligns Switzerland’s framework with the European Union and the United Kingdom, where comparable exemptions have already been implemented.

• The decision was made under Article 131 paragraph 6 of the Swiss Financial Market Infrastructure Ordinance (FinMIO), extending the transitional regime previously granted under Article 131 paragraph 5bis FinMIO. The collateral exchange obligation for non-centrally cleared OTC derivatives arises from Article 107 paragraph 1 in conjunction with Article 110 paragraph 1 of the Swiss Financial Market Infrastructure Act (FinMIA) of 19 June 2015. The new Guidance 04/2025 continues a sequence of prior extensions issued through FINMA Guidance 04/2019, 09/2020, and 09/2023.
• The extension applies to equity-linked derivatives such as single-stock options, index options, and baskets of equities. These products remain temporarily exempt from mandatory collateral exchange requirements. The measure ensures that Swiss market participants are not competitively disadvantaged relative to their EU and UK counterparts, who benefit from comparable exemptions under Article 11 paragraph 3a of Regulation (EU) No 648/2012 (EMIR) and related UK guidance.
• FINMA cited developments in December 2024, when the European Union introduced an indefinite exemption for the same category of derivatives. In light of this, the Swiss authority concluded that extending the domestic transitional period was necessary to “avert disproportionate competitive disadvantages for Swiss derivatives traders.” The decision also reflects FINMA’s authority under Article 131 paragraph 6 FinMIO to modify transitional periods in response to global regulatory developments.
• FINMA stated its intention to support the integration of a permanent exemption mechanism within the ongoing revision of the Financial Market Infrastructure Act (FinMIA). Such codification would provide greater legal certainty and ensure durable alignment with international standards governing non-centrally cleared derivatives.
• During the extended transitional period, supervised entities must continue to observe all applicable risk-management requirements. FINMA underscored the need for institutions to maintain robust internal controls covering counterparty risk, operational resilience, and collateral management processes, particularly when trading options on individual equities, index options, and similar instruments.
• Guidance 04/2025 took immediate effect upon publication on 9 October 2025. The transitional regime now runs until 1 January 2029. The extension preserves regulatory parity with the European Union and the United Kingdom and provides market participants with clarity as Switzerland progresses toward a harmonised, long-term framework for OTC derivatives oversight.

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United States SEC Postpones Crypto Task Force Roundtable on Financial Surveillance and Privacy

On 8 October 2025, the United States Securities and Exchange Commission (US SEC) postponed its Crypto Task Force Roundtable on Financial Surveillance and Privacy due to a lapse in federal appropriations. The event was originally scheduled for 17 October 2025 from 1:00 PM to 4:00 PM ET at the US SEC Headquarters in Washington, D.C. The Commission stated that the roundtable will be rescheduled to a later date, with updated details on the agenda and panelists to be announced once appropriations are restored.

• The delay was formally announced through the US SEC’s events webpage, stating: “Due to a lapse in appropriations, this roundtable will be rescheduled to a later date.” The Commission confirmed that registration for in-person attendance and a public webcast had already been open prior to the postponement.
• The Crypto Task Force Roundtable is designed to facilitate policy discussions on financial surveillance, privacy, and compliance within digital asset markets. It aims to address the balance between transaction monitoring, anti-money laundering (AML) obligations, and individual data protection in decentralised finance ecosystems.
• The event forms part of the broader US SEC Crypto Task Force initiative, launched under Commissioner Hester M. Peirce’s directive to explore regulatory frameworks for digital assets that protect economic liberty while maintaining market integrity. The Task Force continues to coordinate with other divisions, including Trading and Markets, Enforcement, and Economic and Risk Analysis, to align crypto policy with existing securities law principles.
• The roundtable was expected to feature regulatory experts, technologists, and legal practitioners discussing:
  • Frameworks for financial surveillance in crypto markets.
  • Privacy-preserving technologies and data governance.
  • International cooperation on cross-border information sharing.
  • Policy considerations for blockchain analytics, identity verification, and consumer protection.
• The Commission reiterated its intention to host the event once appropriations are reinstated, stating: “The SEC’s Crypto Task Force will host a public roundtable to facilitate an in-depth discussion on policy matters related to financial surveillance and privacy.”
• The postponement temporarily delays industry-regulator dialogue on one of the most sensitive topics in digital finance, the tension between surveillance for regulatory enforcement and privacy for individual users. For crypto exchanges, custodians, and compliance providers, the rescheduling represents a short-term pause in engagement but underscores continued federal focus on data governance in digital asset markets.

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Switzerland FINMA Chair Highlights AI’s Expanding Role in Financial Supervision at Paris AMF–AEFR Conference

On 30 September 2025, the Swiss Financial Market Supervisory Authority (FINMA) Chair, Marlene Amstad, addressed the AMF–AEFR Conference on Technological Frontiers in Finance in Paris, hosted by the Autorité des Marchés Financiers (AMF) and the Association Europe Finances Régulations (AEFR). The session featured regulators from across the globe, including Tuhin Kanta Pandey, Chair of the Securities and Exchange Board of India (SEBI), and Tuang Lee Lim, Assistant Managing Director of the Monetary Authority of Singapore (MAS) and Chair of the IOSCO Fintech Task Force. Amstad’s remarks focused on the rapid rise of artificial intelligence (AI) as both a transformative force and a regulatory challenge in financial supervision. Drawing on FINMA’s market research and the IOSCO SupTech Survey, she highlighted AI’s influence on financial stability, governance, and cross-border collaboration.

• FINMA’s surveys of approximately 400 licensed institutions—including banks, insurers, and asset managers—revealed that AI usage is already widespread across the Swiss financial sector. Amstad stated: “A significant part already use AI or have initial applications in development.” For every AI use case currently deployed, two more are reportedly under development. Financial institutions are applying AI to process optimisation, text generation, and client service chatbots. However, smaller firms’ reliance on external AI providers introduces new outsourcing and operational risks. Governance frameworks are evolving, with nearly half of surveyed entities adopting formal AI strategies that address cyber security, data protection, and risk management.
• “AI has become a leading enabler of SupTech adoption, ahead of cloud and improved data access,” Amstad said, referencing the IOSCO SupTech Survey conducted under FINMA’s leadership. Supervisory authorities, she noted, are moving from pilot projects to operational integration of AI in market surveillance and investor protection. AI tools now play a key role in anomaly detection, compliance monitoring, and enforcement data analytics. Authorities are also exploring its use in digital asset oversight, while remaining cautious about third-party risks and cyber vulnerabilities.
• Amstad summarised the findings of international standard-setting bodies, which identified four main AI-related risks in financial services: third-party concentration, market correlation, cyber exposure, and model risk linked to data integrity and governance. She emphasised that while these risks are familiar, AI accelerates their magnitude and interconnectedness. A “technology-neutral and proportional” approach, she said, remains essential for maintaining systemic resilience.
• The Paris conference continued the dialogue initiated at the IOSCO Annual Meeting in May 2025, where SupTech adoption was formally reviewed. By September 2025, FINMA’s leadership reaffirmed Switzerland’s proactive stance in fostering international cooperation on AI governance and supervisory convergence. The discussions underscored that coordinated regulatory frameworks are necessary to manage AI-driven systemic risks and sustain public trust in financial supervision.
• Amstad concluded that FINMA’s approach to AI oversight remains grounded in principle-based supervision, prioritising transparency, data integrity, and proportional risk management. The conference reinforced that as AI becomes embedded in financial infrastructure, regulators must advance together to ensure innovation is matched by accountability, resilience, and trust.

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US SEC’s Caroline Crenshaw Criticises No-Action Relief Allowing State Trust Companies to Custody Crypto Assets

On 30 September 2025, the United States Securities and Exchange Commission (US SEC), through its Division of Investment Management, issued a no-action letter permitting state-chartered trust companies to act as crypto custodians under the United States Investment Advisers Act of 1940 and the United States Investment Company Act of 1940. The relief allows registered investment advisers, investment companies, and business development companies to treat certain state-supervised trust entities as “banks” for custodial purposes, provided they meet fiduciary and operational safeguards. The decision immediately drew dissent from US SEC Commissioner Caroline A. Crenshaw, who published a statement titled “Poking Holes: Statement in Response to No-Action Relief for State Trust Companies Acting as Crypto Asset Custodians.” She warned that the relief weakens investor protection standards and bypasses the Commission’s statutory rulemaking obligations.

• The no-action relief enables state trust companies regulated under state banking authority to serve as qualified custodians for crypto assets, provided they maintain segregated client accounts, prevent asset commingling, and implement secure custody systems such as encryption and deep-cold storage. The relief covers crypto assets qualifying as “funds and securities” under the Advisers Act or “securities and similar investments” under the Investment Company Act, including tokenised equity and debt instruments. It does not extend to unregistered or utility-only tokens.
• Crenshaw criticised the move as “degrading our custody framework,” arguing that it undermines long-standing federal investor protections designed to prevent loss or misappropriation of client assets. She noted that custody rules established after major frauds such as Madoff and Stanford International Bank Ltd. were meant to ensure assets genuinely exist and remain insulated from custodian insolvency.
• Crenshaw argued that the relief “lacks factual support in key areas and provides scant legal justification.” She contended that the Commission’s assumption—that no federally compliant custodial entities exist, is incorrect and that the action pre-empts the Commission’s formal rulemaking on digital asset custody currently listed in the Spring 2025 Regulatory Flex Agenda.
• The Commissioner highlighted that federally chartered banks, broker-dealers, and futures commission merchants are subject to Office of the Comptroller of the Currency (OCC) oversight, segregation of accounts, and federal receivership protections. In contrast, state trust companies operate under what she termed “an inconsistent hodgepodge of less rigorous rules,” varying by jurisdiction. She warned that “fifty-state regulatory roulette” undermines consistent federal custody standards and investor protection.
• Crenshaw raised equity concerns, asserting that the relief grants state trust companies a regulatory shortcut while disadvantaging compliant applicants pursuing national OCC charters. She viewed this as distorting market fairness and eroding the integrity of federal prudential supervision.
• Crenshaw criticised the bypassing of public comment and economic analysis, calling the relief “an easy way out.” She warned that this may conflict with the Administrative Procedure Act and erode the legitimacy of formal rulemaking processes intended to ensure transparency and accountability in federal financial regulation.
• From a compliance perspective, the no-action letter does not expand the legal definition of a permissible custodian under the Advisers Act or 1940 Act but reflects only a conditional staff position. Firms relying on it must maintain documentation demonstrating equivalence with OCC-supervised institutions.
  • Rule 206(4)-2 (Custody Rule) continues to apply, mandating segregation, reconciliation, and annual surprise audits.
  • Form ADV disclosures (Items 9 and 15) must reflect the custodial arrangement.
  • Audit evidence must demonstrate segregation of assets, access control, and proof-of-reserve reconciliation.
• The Commissioner noted that the relief applies only to crypto assets and does not contemplate similar treatment for traditional securities, despite crypto’s higher fraud exposure. She cited FBI data showing that cryptocurrency-related fraud exceeded USD 5.6 billion in 2023, underscoring the heightened risk of loosening federal custody standards.
• Crenshaw’s statement frames the relief as a departure from established prudential norms and a warning against fragmenting federal custody oversight. Her dissent signals potential legal and policy tension within the Commission, as it seeks to balance innovation with investor protection in the evolving crypto custody landscape.

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United States SEC Commissioner Hester Peirce Calls for Principles-Based Crypto Custody Rules at Singapore Digital Assets Summit

On 30 September 2025, United States Securities and Exchange Commission (US SEC) Commissioner Hester M. Peirce addressed the Digital Assets Summit in Singapore, delivering her keynote titled “Cultivating Confidence: The Role of Custody in Institutional Confidence – Public Trust and Oversight.” Commissioner Peirce discussed the urgent need to modernise the regulatory treatment of crypto custodians, arguing that investor confidence rests on adaptable, principle-driven frameworks rather than rigid prescriptive rules. She criticised the impact of restrictive policies such as the US SEC’s Staff Accounting Bulletin (SAB) No. 121 and the Special Purpose Broker-Dealer (SPBD) framework, which she said had hindered participation by legitimate custodians. Peirce called for rules that leverage blockchain transparency and smart contracts to enhance both protection and efficiency.

• Peirce outlined the US SEC’s evolving approach to custody regulation, tracing it from the 2020 SPBD framework to the 2025 reversal of SAB No. 121 through Staff Accounting Bulletin No. 122. She explained that regulatory uncertainty continues to erode institutional confidence, deterring qualified custodians from entering the crypto sector. Overly restrictive capital and balance sheet requirements, she warned, risk driving investors toward unregulated alternatives.
• The Commissioner stated: “The SEC’s Special Purpose Broker-Dealer framework for the custody of digital asset securities proved virtually unusable due to unrealistic constraints.” She further noted that SAB No. 121 had made custody of crypto assets “commercially impracticable” for institutions unable to bear associated capital charges. While welcoming its reversal through SAB No. 122 in January 2025, Peirce cautioned that bank capital regulations could still discourage traditional custodians from providing crypto custody services.
• Peirce emphasised that the future of custody regulation should be “grounded in principles, rather than attempting to prescribe custodial practices.” She proposed flexible frameworks that accommodate diverse models of custody, including those enabled by distributed ledger technology (DLT), self-custody, and smart contracts. “Perhaps registrants should be able to use custodians other than traditional financial institutions,” she suggested, adding that advisers with sufficient technical capability could potentially self-custody digital assets responsibly.
• The Commissioner underscored the role of DLT in reducing operational opacity and improving investor protection. She observed that blockchain can “mitigate information asymmetry and allow investors to verify assets held by a custodian in real time,” aligning technological transparency with the core objectives of securities law.
• “A trustworthy custodian protects customer assets from loss, destruction, and theft and is subject to a framework for protecting customer assets from creditors of the custodian and from competing claims by other customers if the custodian fails,” Peirce stated. She reiterated that regulatory clarity i.e. achieved through well-designed principles, forms the foundation of institutional confidence in digital asset markets.
• Peirce encouraged continued dialogue through the US SEC Crypto Task Force, which remains engaged with public stakeholders to refine custody frameworks. The Task Force, launched in early 2025, serves as a bridge between regulators and industry participants to harmonise oversight without stifling innovation.
• Peirce’s remarks signalled a jurisprudential shift from prescriptive to adaptive regulation, balancing commercial practicality with technological innovation. Her call for redefining what qualifies as a “custodian” under the Investment Advisers Act of 1940 and related securities laws underscores a pivotal reorientation in US regulatory philosophy, one that prioritises investor protection through accountability, not constraint.

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