Swiss cryptocurrency space getting regulated

FINMA has seen a sharp increase in the number of initial coin offerings (ICOs) planned or executed in Switzerland and a corresponding increase in the number of inquiries about the applicability of regulation.

In the guidelines published last month by Financial Market Supervisory Authority FINMA, they draw a picture of what an ICO in Switzerland shall look like. Furthermore, the guidelines also define the information FINMA requires to deal with inquiries and the principles upon which it will base its responses, creating clarity for market participants.

ICOs are a digital blockchain-based form of public fund-raising for entrepreneurial purposes. In a legal and regulatory framework with unclear applicability, FINMA’s recently published guidelines, which complement its earlier FINMA Guidance released in Q4 2017, setting out how it intends to treat inquiries from ICO organizers. Creating transparency at this time is essential given the dynamic market and the high level of demand.

Each case must be decided on its merits

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 subject to regulatory requirements.

Circumstances must be considered on a case-by-case basis. As set out in FINMA Guidance 04/2017, there are several areas in which financial market regulation potentially impacts icos. At present, there is no ICO-specific regulation, nor is there relevant case law or consistent legal doctrine.

FINMA puts ICO’s in three primary categories

In order to decide what regulation applies on certain ICO’s FINMA tries to apply them to one or a combination of 2 types:

  • Payment tokens are simple cryptocurrencies and have no further functions or links to other development projects. Tokens may in some cases only develop the necessary functionality and become accepted as a means of payment over a period of time. Bitcoin would be an example for this.
  • Utility tokens are tokens which are intended to provide digital access to an application or service. Ethereum or ripple would be an example here.
  • Asset tokens represent assets such as participation in real physical underlying, companies, or earnings streams, or entitlement to dividends or interest payments. Regarding their economic function, the tokens are analogous to equities, bonds or derivatives. An example would be Lykke coins, or any gold backed currency like AurumCoin.

In an interview with CNN Money Switzerland a spokesman said that a priority for FINMA is to go for a “balanced” approach to allow for innovation.


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