Switzerland - legal framework for cryptocurrencies


Регулирование криптовалютной деятельностиLegal framework for cryptocurrencies

Even though the popularity of cryptocurrencies fluctuates along with their exchange rates, many still choose to invest in crypto and even to raise funds for their projects upon conducting of ICOs (Initial Coin Offerings) or, more often lately, STOs (Security Token Offerings). For that purpose, it is vital to understand how any such crypto activity is regulated in this jurisdiction and which requirements should be complied with to conduct such activity within the territory of Switzerland.

Swiss government acknowledges the potential positive effect which the distributed ledger technology (or – blockchain) may bring to the finance sector of economy, and the Zug Canton has even received an unofficial name of “Crypto Valley” analogous to the Silicon Valley in the US.

Notwithstanding that Swiss law does not define the term «cryptocurrency» or «virtual currency», it was indicated in one of the Swiss government’s reports and later used in amendments to the anti-money laundering regulations, that «a virtual currency is a digital representation of a value which can be traded on the Internet and although it takes on the role of money – can be used as means of payment for real goods and services, – it is not accepted as legal tender anywhere». Therefore, cryptocurrencies are not regarded as official money, however, some specialists in the field argue that crypto may qualify as “money” in a broader sense, provided that they are widely used, accepted by the public and adopted the typical functions of money. At the same time, for the purposes of VAT, cryptocurrencies are treated as legal tender (exempt from VAT), and for the purpose of tax assessment such virtual currencies shall be converted into Swiss francs.

Swiss financial regulatory body FINMA (Financial Market Supervisory Authority) was among the first in Europe to issue an ICO Guidance for those interested in this field, where it explained as to the types of tokens by dividing them to payment tokens (cryptocurrencies), utility tokens (which provide access to some blockchain-based platform) and asset tokens (backed by some real asset).

Issuance, sale and purchase of the latter might cause difficulties as far as they can be recognized as securities (financial instruments) and therefore may fall under the scope of stock exchange regulations, may require to be registered with the government, unless any exemption from such registration is applicable.

There are no licenses or permits specifically related to the crypto field, thus a variety of regulatory licenses may be applied to cryptocurrencies, in particular, banking license, securities dealer license etc. Moreover, some kinds of operating of a crypto trading platform may require licensing, for example, an “operating trading facility” may be operated only by a licensed bank, a licensed securities dealer (trader) or a recognized (foreign) trading venue.

In general, Switzerland has become a heaven jurisdiction for crypto businesses due to its clear and transparent regulation, while many other European countries has not yet decided as to how to treat cryptocurrencies.