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How To Go Crypto in Switzerland: All Regulations for Blockchainers

14 September 2018 15:07, UTC
How To Go Crypto in Switzerland: All Regulations for Blockchainers

Switzerland. The "Country Bank", associated with high reliability, security, elitism and traditions. Indeed, this is one of the most developed countries in the world, with a high standard of living. Switzerland is a federal republic, consisting of 20 cantons and 6 semicantones. Each canton has its own constitution and laws, though the federal constitution restricts the above-mentioned. Competitiveness of the Swiss economy is at the highest level too: the country enters the TOP-10 leading economies in the world. The HQs of several international organizations are also located in Switzerland. Monetary security and banking secrecy characterise Switzerland as a "place of power" on the global business globe.

Some interesting facts about the Swiss economy

  • Switzerland leads the world in the gold refining, processing two-thirds of its global production. The four largest precious metals refining companies are based in the country.

  • Following that, Switzerland is the world's largest importer and exporter of gold.

  • About 4000 financial institutions function in the country. Swiss banks account for 35-40% of global private and legal entities property management.

  • Switzerland is the fourth largest exporter of capital in the world after the USA, Japan and Germany.

  • The banking sector accounts for 9% of the state's GDP.

Blockchain startups are striving to get to the Switzerland. Why?

According to the PwC report, four out of the ten largest ICOs are based in Switzerland. This is a clear indicator of the country's success in the field of the crypto industry. The city of Zug, sometimes called as the ‘Crypto Valley’, serves as the base for a huge number of blockchain companies, including the Ethereum Foundation and the Cardano project. The Swiss Financial Market Supervision Authority (FINMA) constantly monitors the changes in the field of crypto and ICOs, developing and modifying regulatory guidelines.

Key milestones in the development of Swiss crypto industry:

December 2013, the Swiss parliament proposed a postulate regarding that bitcoin should be considered as a foreign currency. The postulate was signed by 45 out of 200 members of parliament.

July 2017. Swiss Federal Council announced the creation of a "regulatory sandbox" in order to develop the favourable environment for startups. The Council announced its intention to "establish the legal status of the cryptocurrency".

December 2017. The tax authorities of the cantons Zug and Lucerne announced the criteria for taxation of digital money and demanded to pay a property tax on the crypto currency. This caused a number of comments from crypto-enthusiasts.

January 2018. In an interview with Financial Times, Economy Minister Johann SCHNEIDER-AMMANN said that Switzerland has everything to become a "crypto nation."

February 16, 2018. FINMA published new regulatory guidelines for the ICO in Switzerland.

In February 2018, the head of the Swiss Stock Exchange, Romero LACHER, stated that it was possible to issue a crypto version of the Swiss franc called E-franc.

In response, in April of the same year, Andrea MEHLER, a member of the board of directors of the Swiss Central Bank, doubted the idea, claiming that unofficial cryptocurrencies bear fewer risks than state ones. She also put under the question that Switzerland would release its own tokens eventually.

Synopsis of the official document

Andreas VLACHOS, Academic Coordinator Officer of the Blockchain Initiative at University of Nicosia, commented Switzerland's official documents on the regulation of ICO:

  • The document focuses on the treatment of ICOs.

  • It includes guidelines by the Swiss Financial Market Supervisory Authority (FINMA), setting out how it intends to treat enquiries from ICO organisers.

  • Financial market law and regulation are not applicable to all ICOs. Depending on the manner in which ICOs are designed, they may not in all cases be subject to regulatory requirements. Circumstances must be considered on a case-by-case basis.

Key areas of discussion

3 categories of tokens according to FINMA (hybrids are possible):

  • Payment tokens are synonymous with cryptocurrencies and have no further functions. To become accepted as a means of payment over a period of time. FINMA will require compliance with anti-money laundering regulations and will not treat such tokens as securities.

  • Utility tokens are tokens which are intended to provide digital access to an application or service. These tokens do not qualify as securities only if their sole purpose is to confer digital access rights to an application or service and if the utility token can already be used in this way at the point of issue. If a utility token functions as an investment in economic terms, FINMA will treat such tokens as securities.

  • Asset tokens represent assets such as participations in real physical underlyings, companies, or earnings streams, or an entitlement to dividends or interest payments. The tokens are analogous to equities, bonds or derivatives. FINMA regards asset tokens as securities, which means that there are securities law requirements for trading in such tokens, as well as civil law requirements.

Minimum information requirements for ICO enquiries

General information

  • Name of the project.

  • Company name / names of the project operators including domicile of the company/companies, address(es), email address(es) and website(s).

  • Details of all persons involved ( incl. addresses and/or domicile of the company), in particular:  founder, token issuer, token seller, other secondary trading participants (platform, ICO organisers, etc.)

  • Have the above-named persons been granted licences under financial market law in other countries? If yes, please provide the relevant details.

Project description

  • Project name, goals and project plan.

  • Key features of the service to be developed.

  • Which market participants (investors) does the ICO target?

  • Are there any restrictions regarding investors?

  • Information about the project organisation and project planning (timing of the various ICO phases, milestones, etc.)

  • Information about the technologies to be used (distributed ledger technology used; are new or existing technologies used; is this an open source project; etc.) With which cryptocurrencies (or legal tender) will the ICO be financed and how?

  • How much money is the ICO intended to raise?

  • Have the funds already been allocated to a specific project? How will surplus funds be handled?

Token issuance

  • Will a token be created in the course of the ICO?

  • If yes: In which steps will the token be created (technical standards, e.g. ERC20, technology used, etc.)?

  • At which point, by whom and in which manner will the token be transferred to the investors?

  • Which functionalities are planned for the token?

  • At which point will the functionalities planned apply?

  • Which rights does the investor acquire? How are they documented (provide and refer to specific participation and issuing conditions).

  • Will a financial intermediary who is subject to AMLA in Switzerland be commissioned to meet the due diligence requirements under AMLA?

  • If yes: detailed information must be provided about the relevant processes and the financial intermediary in question.

Transfer and secondary market

  • How can the token be transferred (please provide information about compatible wallets, technical

  • standards)? Is the token already functional at the time of transfer? If yes, to what extent?

  • How and where can the token be acquired or sold after the issue (are there any secondary market platforms)?

  • Will it be possible to use the tokens to buy goods or services or make payments to third parties?

  • Are there plans for the project operator / issuer to buy back tokens.

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