FINMA, the Swiss Financial Market Supervisory Authority, recently released guidelines stating how it will apply financial market legislation to enquiries from ICO organisers.
No one could doubt this was a timely move. Switzerland has been rapidly emerging as a crypto hub: four out of the 10 biggest proposed ICOs used Switzerland as a base in 2017, while FINMA has been receiving a stock of requests for ICO guidance. The Alpine country features undoubted advantages for digital pioneers, such as rich investors, a cluster of technology specialists, and, what is most important, tax and regulatory advantages.
In its document, FINMA said “creating transparency at this time is important given the dynamic market and the high level of demand”.
FINMA said it will divide tokens into three types: payment tokens, utility tokens, and asset tokens. Payment tokens are “synonymous with cryptocurrencies and have no further functions or links to other development projects”. Utility tokens are “tokens which are intended to provide digital access to an application or service”. Asset tokens represent assets such as “participations in companies, or earnings streams, or an entitlement to dividends or interest payments”, they are an analogue of equities, bonds or derivatives.
From now on, FINMA will treat asset tokens as securities, which means trading in such tokens will have to comply with securities law requirements and civil law requirements under the Swiss Code of Obligations. In terms of payment ICOs, FINMA will not treat such tokens as securities, but FINMA will require compliance with anti-money laundering regulations. Utility tokens will be treated as securities only if a utility token functions solely or partially as an investment in economic terms.
Oliver Bussmann, president of the Crypto Valley Association in the canton of Zug, says that the newly released guidelines will increase the number of Swiss ICOs. He believes this is yet another contribution to establishing a sustainable business in the country, this move is not just about raising capital and moving on.
We will soon see what is the best approach: to ban ICOs like China and South Korea did, or offer economic opportunities instead.