The Switzerland regulator frames the crypto-economy

The Switzerland regulator frames the crypto-economy

FINMA set out public position on initial coin offerings (ICOs). Cryptocurrencies are part of the anti-money laundering law and issued tokens can be considered as shares.

FINMA boss Marc Branson notes that the laws governing financial markets apply to ICOs most often in the areas of the fight against money laundering and securities trading. (Credits: AFP)

It was a decision expected by the growing community of cryptocurrency investors and issuers of Initial Coin Offering, this form of crowdfunding based on the blockchain with the issue of chips giving right to a future product but also to dividends and other financial products.

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With its guidelines, FINMA clarifies what is possible or not in the field of the crypto-economy by setting a welcome framework for the actors but also by putting an end to the Far West of the ICOs. In recent months, FINMA has received more than 100 requests for rights notices from issuers of ICOs.

Asset token equal action

In essence, the Swiss regulator distinguishes three types of tokens (tokens) issued during an ICO. Payment tokens are recognized as bitcoin or ether type cryptocurrencies and fall, as a result, under the anti-money laundering law. The Utility Tokens give a digital access right to a service or a product usually coming soon, a model quite similar to Kickstarter crowdfunding except that it is guaranteed by the blockchain that records all the transactions of these tokens.

Finally, this is where the greatest risk of fraud is, Asset tokens that offer a stake in a company, income, dividends or interest are considered financial assets (equities, bonds) and regulated in the same way.

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This means that an ICO that intends to issue asset tokens will have to obtain authorization from a securities dealer to be able to do so. Given that there are a number of hybrid tokens (both Payment and Asset for example), FINMA specifies that then this token will be well subject to the two regulations in force.

For Alexis Roussel, co-founder of the crypto-currency trading platform bity.com, these guidelines are welcome. “Not only has FINMA done a thorough job of strengthening Switzerland’s position in the crypto-economy, it’s also clarifying the legal framework without changing it. It also goes very far in recognizing this economy by evoking for the first time in an official document cryptocurrency while she spoke of virtual currencies so far.

The regulator can’t prevent a doubtful ICO

Vincent Pignon, the president of the Swiss Crowdfunding Association and CEO of Wecan.Fund, adds: “It’s rather a good signal that will allow to continue the emergence of ICOs in Switzerland. There is no real surprise, the element that seems positive to me is the edition of a guide, which structures, facilitates and accelerates (hopefully) the FINMA ruling. Most of the tokens are hybrids, so it will need to comply with the regulations in place. “

The position taken by FINMA isn’t an absolute guarantee that there aren’t questionable ICOs – the regulator can’t prevent them preventively.

But now investors have ways to better evaluate the ICOs typically described in a white paper. For example, if the asset token sale isn’t accompanied by the issuer’s securities dealer authorization in its documentation, it will be a warning signal. And likewise a legal basis to make a complaint if necessary. So it’s a very big step forward.

Written by Vincent Ashton