Laws Related to Token Sales, Blockchain, and Digital Proof

As per the latest FINMA guidance, ICOs are not specifically regulated in Switzerland. According to the guidance, it is likely that an ICO specific regulation is not to be announced in the near future. FINMA highlights regulations hurdles that need to be assessed in the context on an ICO. Given the large diversity in the variety, structures and features of ICOs, FINMA is concluded that a generic ICO regulation is unlikely to result in a more efficient regulation and a case by case analysis of applicable laws is required, in particular in the following areas[1]:

  1. In case the ICO creates a token as a payment instrument, anti-money laundering rules may apply for professional cryptobrokers or other third parties or trading platforms which carry out exchange transactions or transfers with tokens (secondary trading with tokens);
  2. If the tokens issued in the ICO qualify as securities as per Swiss law, a licensing requirement to operate as a securities dealer may apply;
  3. Banking law provisions need to be considered, in case public deposits are accepted; and
  4. Collective investment schemes legislation may apply in case the ICO proceeds are managed externally.

2. Criminal Laws applicable to blockchain operations

Blockchain operations are also subject to criminal laws, in particular provisions governing acts aimed at frustrating the identification of the origin, the tracing or the forfeiture of assets which are known to be, or which must be assumed to be, of criminal origin (Art. 305bis Swiss Criminal Code (SCC). Financial instruments routed through blockchain operations are, however, also protected against criminal behaviour against assets in the form of fraud (Art. 146 SCC) or embezzlement (Art. 138 SCC). Data with which blockchain operations are dealing are protected by many different criminal provisions, such as those governing illicit data gathering (Art. 143 SCC), data corruption (Art. 144bis SCC) and fraudulent misuse of data systems (Art. 147 SCC) [2].

3. Banking regulations

Banks are defined as entities that are active mainly in the area of finance and in particular, but in a non-exclusive under-standing, those who accept deposits from the public on a professional basis or solicit these publicly to finance in any way, for their own account, an undefined number of unrelated persons or enterprises (ie, more than 20 clients), with which they form no economic unit, or who refinance themselves to a substantial degree from third parties to provide any form of financing for their own account to an undefined number of unrelated persons and institutions. A FinTech company (e.g. companies that offer financial services based on blockchain technology, crowdfunding, mobile payment applications or robo advice) providing bitcoin wallets to its customers which allow repayment in fiat money (ie, money governed by regulation or law) would fall under banking regulation and may require a banking license.

Switzerland has introduced some initiatives to deregulate FinTech companies and help increase innovation, which include [3][4]:

  1. Setting a deadline of 60 days for the holding of money in settlement accounts, which is particularly relevant for providers of crowdfunding services. Fundraising for a crowdfunding project can thereby be facilitated. This amendment would not be restricted to fintech companies, and would instead be generally applicable
  2. Creation of an innovation area or sandbox, e.g., the exclusion of certain activities from regulation which would otherwise require a license. At present, a bank license is required for any company that accepts deposits – irrespective of their size – from more than 20 customers or that publicly advertises the acceptance of deposits. The Federal Council acknowledges that – especially for FinTech companies – this may trigger a bank licensing requirement at an early stage that may prevent the implementation and realization of business ideas. Therefore, the Federal Council suggests the creation of an innovation space that is exempted from a bank license requirement (so-called Sandbox)
  3. Creation of a new bank license “Light” for companies that accept deposits up to a maximum of CHF 100 million, provided that such deposits are not re-invested (i.e. they are not used to on-lend) and they are not interest bearing. This bank license “light” should be available for companies that do not conduct a traditional banking activity, where deposits must be repaid immediately and the loans provided by banks may be repaid only upon maturity or default.

Detailed information on these regulations can be found on Schellenberg Wittmer and The Federal Department of Finance. Information on regulations related to tokens can be found on FRORIEP.


[1] Information quoted from Pestalozzi Attorneys at Law

[2] Information quoted from PWC Switzerland

[3] Information quoted from Walderwyss attorney at law newsletter 118

[4] Information quoted from Schellenberg Wittmer April 2017 newsletter

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