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SRO in Switzerland. New opportunities for crypto and payment projects.

Switzerland is known as a “crypto-friendly” and business-friendly jurisdiction in general, although it does not have a separate law aimed at regulating cryptocurrencies. The regulation of Swiss cryptocurrency and the provision of financial services is one of the strictest AML / KYC policies in Europe. Swiss law defines cryptocurrency as virtual assets, virtual property. As a general rule, if a company accepts money from a client in cryptocurrency and manages it or provides other payment services, it must obtain a special banking license from the regulatory authority (FINMA). However, there is a way to carry out the above activities with cryptocurrency, payment services, or financial intermediary services without a license.

What is SRO?

In Switzerland, self-regulatory organizations (hereinafter – “SRO”) are supervised by FINMA and supervise the activities of the financial intermediaries that are their members. The main responsibility of SRO is to establish rules and monitor the compliance of their members with the requirements of the law.

Particular attention is paid to the fulfillment by SRO members of the obligations established by the Swiss Anti-Money Laundering Act. Each SRO has its own internal documents, which provide detailed procedures for preventing money laundering, which, in turn, their members must incorporate into the company’s internal documents. SRO has very strong control over the activities of the company’s AML departments and may require not only a regular internal annual audit from the company itself, but also require such an extraordinary audit.

What services can an SRO member provide?

Swiss law allows a company to join a self-regulatory organization recognized by FINMA and provide some financial services without a license from the regulator.

There are list of services can be provided by SRO member and without a license from the regulator. Such services are:

  • carry out credit transactions (in particular in relation to consumer loans or mortgages, factoring, commercial financing or financial leasing);
  • provide services related to payment transactions, in particular by carrying out electronic transfers on behalf of other persons, or who issue or manage means of payment such as credit cards and travellers’ cheques;
  • trade for their own account or for the account of others in banknotes and coins, money market instruments, foreign exchange, precious metals, commodities and securities (stocks and shares and value rights) as well as their derivatives;
  • make investments as investment advisers;
  • hold securities on deposit or manage securities.

The above list of services also apply to cryptocurrencies companies. Of course, you should not rejoice prematurely, because the relevant legislation on a particular type of service may contain restrictions, the departure of which will create the need to obtain a license directly. For example, if you will hold your clients money more than 60 days or the sum which you hold precedes 1 million Swiss francs, you will need to obtain FINMA license.

Key requirements for joining SRO

Swiss law, like the SROs themselves, imposes certain requirements on the applicant to join the SRO. These include the fact that a financial intermediary has the right to join a self-regulatory organization if:

  • the financial intermediary ensures the fulfillment of its obligations under the AML Act through its internal rules and organization;
  • the financial intermediary enjoys a good reputation and guarantees the performance of its duties in accordance with this AML Act;
  • the persons responsible for its administration and management also meet the requirements of the paragraph above; as well as
  • its qualified participants enjoy a good reputation and ensure that their influence does not harm prudent and reliable business operations.

However, these are not all requirements, but only a small part of them. There are actually a lot of requirements, but they are more formal and involve filling out all sorts of standard entry documents. Among the key requirements are also the following:

  • The Director and Compliance officer must be residents of Switzerland;
  • Availability of a local office;
  • Paid-up share capital;

Conclusion

SRO is a good business solution for companies that want to enter the niche of cryptocurrency or payment services, but do not want to spend too much money, time and effort to obtain a license from FINMA.

Of course, you should not relax, because the process of joining the SRO is easier than obtaining a license, but it does not happen in one day. The relevant company will need to provide the documents and information required when joining SRO and follow its internal rules.

Our specialists in SBSB Fintech Lawyers will be happy to answer your questions about joining SRO and are ready to help your company become a member of this organization.

 

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