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Yuliya Barabash, 09.02.2018

Regulation of ICO in Switzerland

Where to register a company for cryptocurrency?

Regulation of ICO in Switzerland

Another advanced country in the field of ICO and crypto-currencies is Switzerland. Legal regulation of the crypto currency in Switzerland is at a fairly high level. The authorities of the canton of Zug have been given the opportunity to conduct city payments to Bitcoin for research purposes. However, including the rapid growth of innovative technologies in the field of block-technology and ICO, the legal framework of Switzerland is still in the process of revision and changes.

License for cryptoexchange in Switzerland

Registration of the crypto-exchange, as in many countries, will depend on the sphere of the company that provides financial services and will be subject to the supervision of the financial market regulator in Switzerland - FINMA (Swiss Financial Market Supervision Service). The license that issued for crypto currency is usually of a banking type, or a special work permit is granted. Those companies that are in the status of a financial intermediary do not need permission from FINMA, but are given the opportunity to join a self-regulatory organization.

For more information on licensing and regulation of Crypto-currency in Switzerland, read our previous article: "Legal Regulation of Electronic Money in Switzerland".

Regarding Banking license

It is issued to a crypto-exchange or a company that is professionally engaged in receiving investments, and also offers its services openly. But the requirements for a particular company may vary. As a rule, the term for issuing a license for crypto currency can take six months, and the authorized capital must be at least 1 million francs.

Specifically:

• Investments exceed the number of depositors - 20, and deposits exceed 1 million Swiss francs;

• assets are paid to the clients' own accounts;

• The activities of the company/bank are related to trading in securities.

FinTech license in Switzerland

Since August 2017, Switzerland has been authorized maintain activities without a corresponding license for cryptocurrency, in cases where the size of deposits from participants does not exceed 1 million francs, but the term of such deposits should not exceed 60 days. And this is not the last simplification in the field of ICO regulation.

At this stage, there are negotiations about allowing FinTech companies to accept capital investments that will not exceed one million francs, but one hundred million. However, today permission to pay interest or invest these deposits is not possible, except in cases of commercial or production activities.

Obtaining permission for ICO in Switzerland

The ICO and the person who manages the project is the holder, and must have permission from FINMA. Without this permission, crypto-exchange does not have the right to distribute ICO. Both the product itself and the financial institution are subject to regulation. Payment systems also need FINMA approval. This is required to protect all participants and if such a payment system is not used by the bank.

There is also a way to join the self-regulating organization (SRO), which is recognized by FINMA, there are only 12 of them.

It should be noted, that in Switzerland a company called Moving Media GmbH is the first and at the moment the only one that received the appropriate permission for operations with crypto currency.

Earlier, it consisted of a self-regulating organization ARIF. Moving Media GmbH has spent more than one year on the entire procedure of obtaining the appropriate permit and licensing.
For now, Switzerland does not have common rules for regulating financial markets, therefore each case is considered on an individual basis.

As well as in the UK and other modern countries regarding to ICO projects, crypto-exchanges that conduct their operations with crypto-currency in Switzerland are required to fulfill the requirements for identifying the participants and to follow all transactions, as well as money turnover, in order to identify funds received illegally.

ICO in Switzerland. Summer up

In September 2017, the Swiss Financial Market Supervision Service issued a press release, with the results of the ICO study. Those investments, that were collected for a personal account without the participation of an issuing bank and a platform, and in which there are no obligations to repay the funds, and also there is no secondary market and without issuing payment instruments, will not be regulated by the financial regulator.

It should be noted that the general regulatory framework can be applied depending on the structure of the ICO, namely:

• Those companies and crypto-exchanges, that deal with transactions at a professional level (secondary trading), issue tokens and include issuance of a payment instrument, will have to fulfill obligations that counteract money laundering;

• A license for crypto currency (or a banking license) for an ICO project is required where there are obligations to depositors;

• In case of issued tokens, which will be classified as securities, it will also be necessary to obtain an appropriate license;

• Approval from FINMA will be required if the collective contributions are collected by the ICO and administered from outside.

To summarize, it can be sad that in order to create an ICO project and register crypto-exchange in Switzerland, an expert is needed, the person who is very knowledgeable in financial regulation and understands the technology of blockchain. Otherwise, Swiss laws can impose severe restrictions.

For over five years we have been advising our clients in the field of corporate law, international tax planning, finance, international licensing and integrated business support in more than 40 countries. We will be glad to help you.

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