We’ve spent a reasonable amount of time talking about cryptocurrency regulation in the European Union, primarily how it changed thanks to the Fifth Anti-Money Laundering Directive. However, one of the countries that deserve special attention when it comes to cryptocurrency regulation is Switzerland. Because Switzerland is not part of the European Union, they have their own rules in place.
How Does Switzerland Define Cryptocurrencies?
A Swiss Federal Council report recently defined cryptocurrencies as, “a digital representation of a value which can be traded on the Internet but not accepted as legal tender anywhere.” This means that Switzerland considers digital currencies to be an asset class similar to property instead of money. Overall, the country has adopted a progressive viewpoint toward cryptocurrencies, much more so than some of its surrounding European neighbors.
Swiss law requires asset holders to declare their holdings on their annual tax returns. The assets are subject to the Swiss wealth tax. Swiss law does not provide complete anonymity when it comes to cryptocurrency holdings.
The Operation Of Swiss Crypto Exchanges
Switzerland has also put regulations in place regarding the ownership and operation of cryptocurrency exchanges. Anyone wishing to operate a cryptocurrency exchange must first receive a license from the Swiss Financial Market Supervisory Authority before doing so. The company has sought to put measures in place to handle the rise in Initial Coin Offerings its seen over the past couple of years.
The organization states that ICOs fall under principle-based regulations. However, they also say that depending on the organizational structure of the ICO, existing rules may cover some parts of the ICO. For instance, Switzerland has expressed numerous concerns about ICOs and how they relate to:
• Banking law provisions
• Provisions on fighting money laundering
• Requirements on combatting terrorist financing
• Provisions on securities trading
• Regulations set out to a collective investment scheme legislation
The Swiss Financial Market Supervisory Authority has also stated that they are currently investigating numerous ICOs to determine if they are legitimate or fraudulent. The Authority has warned consumers multiple times about fraudulent activity that tends to occur when dealing with fake cryptocurrency providers.
The Blockchain/ICO Working Group
In January 2018, after a string of ICO openings, the Swiss government set up what was known as a “blockchain/ICO working group.” This purpose of this group was to analyze the current legal framework in place regarding cryptocurrencies. It also sought to determine better what action needed to be taken by Swiss regulators and lawmakers.
The results of this group have yet to be presented. But to say that there is significant anticipation is an understatement. Some predict that there could be simple changes in place, such as removing “wet ink signature” requirements. Others predict that the group could recommend the formation of a new asset class dedicated entirely to cryptocurrencies.
Regardless, there’s a strong chance that government officials seek to sustain their progressive approach. Switzerland has long been known as a company that fostered innovation. In fact, the area of Zug-Zurich is known as the “Crypto Valley” because it is known as of the leading blockchain ecosystems.
Could Your Crypto Actions Be Subject To Anti-Money Laundering Compliance?
There’s a strong chance that your cryptocurrency activity could be subject to compliance under the Swiss Anti-Money Laundering Act. To determine if you meet these criteria, you should first ask yourself whether you engage in any activities that could subject you to this act, such as the sale or trading of cryptocurrencies.
Additionally, financial institutions who fall subject to these rules don’t necessarily need to fall under the umbrella of the “banking sector.” Financial institutions could also represent the nonbanking sector. This involves anyone who accepts or holds assets belonging to a third party, assists in the transfer of assets, or assists in the investment of assets. Remember that the Swiss government considers cryptocurrencies an asset class similar to properties.
If you think that your cryptocurrency activity could subject you to anti-money laundering compliance, you can then look into regulations explicitly related to cryptocurrencies. For instance, FINMA requires financial intermediation for the initial offering of native payment tokens, but a utility token is not subject to such regulation. However, this is only the case if the primary purpose of the token is for a non-financial application of blockchain technology.
However, it could be in your best interest to follow the Swiss Anti-Money Laundering requirements. This is a conservative, “better safe than sorry” approach. It helps to ensure that, no matter what, you’ll remain complaint with Swiss law. This could also help in future instances, assuming that there is a good chance the Swiss government one day introduces stricter regulations. The transition from current regulation to new regulation would be seamless.
Additionally, many organizations find that they benefit from the Know Your Customer and Anti-Money Laundering tools used to meet these regulations. After the ICO, having KYC and AML already in place serves incredibly beneficial. Ensuring compliance could make it easier to work with Swiss banks to open fiat accounts. It could also make it easier to expand overseas and work with other international companies or in the EU.
Interested In KYC Compliance?
If you’re considering an ICO in Switzerland, you may be interested in KYC Compliance. Fortunately, at AU10Tix, we offer state-of-the-art compliance solutions designed explicitly to meet your company’s needs. We take the time to learn your company’s infrastructure and goals for the project. We then provide you with full-automated secure customer onboarding and KYC initiation, simplifying the process for your team.
Our systems have been proven to provide anti-money laundering efforts. We program our algorithms to seek out forgeries and counterfeiting explicitly. Our authentication checks have shown time and time again to exceed regulatory requirements. We also provide facial recognition software that can match government-issued IDs to the individual wishing to purchase your token.
We initially developed our technology for airport and border security, but we quickly realized that it could have broader implications. Be sure to contact us today to learn more about how we can ensure your ICO meets crypto regulations in Switzerland and abroad.
