In what is shaping up to be a strong year for cryptocurrency regulation, Swiss Federal Council members are now seeking formal regulation for cryptoassets, through a series of proposals which would see existing regulation retrofitted and adapted to the emergence of blockchain technologies.
This comes shortly prior to an address by the French Minister for Economy and Finance, Bruno Le Maire, who called for pan-European cryptoasset regulation to be implemented following France’s lead. However, as a country with a traditionally world-leading approach to financial instruments and regulation, it seems unlikely that the Swiss government will be left behind when it comes to cryptoassets.
The move to formalize crypto regulation in Switzerland follows a motion from Federal Council member Giovanni Merlini, who intends to adapt provisions for current procedural instruments for traditional financial products and adapt them to cryptocurrencies. The motion passed with 99 to 83 votes in favor and 10 abstentions, with the major impetus behind the motion to close the regulatory gaps and limit the potential for abuse and exploitation of cryptocurrency investors.
Switzerland are known for their adoption of new financial technology, and the Swiss Financial Market Supervisory Authority (FINMA) have published several guidelines addressing relevant regulation for cryptoassets.
For example, the 2017 guidance on the Regulatory Treatment of Initial Coin Offerings, details AML, banking, securities and collective investment schemes for ICOs launching in Switzerland; alongside supporting guidelines detailing comprehensive token taxonomy to cover the various types of token, i.e. payment, utility and asset-backed tokens.
Likewise, although at present ICO operators who are issuing a token analogous to equities or bonds, and therefore a security token, may be required to publish a prospectus, there is no requirement to file the token with the Swiss Authorities. This is soon set to change, when The Financial Services Act (FinSA) comes into force in 2020, and asset-backed tokens will face more tailored regulation.
However, as highlighted in the Global Cryptoasset Regulatory Landscape Study, Switzerland lacks a single definition, and therefore a central point of reference, as to what cryptoassets actually are. This regulatory hurdle appears to be a common theme within European nations and is severely restricting both the usefulness of current regulation, and the formation of new cohesive regulation within the European Economic Area.
Nevertheless, Switzerland remains a hub of blockchain activity, home to Crypto Valley in Zug, a hotspot for some of the best projects in crypto. To aid blockchain based businesses in navigating the Swiss regulatory landscape, Crypto Valley have published their own guidelines in association with professional services provider PwC, called “A primer on the regulation of trading in cryptocurrencies and asset management related to cryptocurrencies in Switzerland”.
It’s currently unclear whether Switzerland will follow suit with its French neighbors in providing tailored cryptoasset regulation, rather than retrospective fitting of existing financial laws. However, a recent press release by the Swiss State Secretariat for International Finance (SIF) commented that despite the Federal Council looking to improve blockchain frameworks, there is no need for fundamental adjustments to the already comprehensive regulatory framework currently in place. Instead, the press release states, there needs to be a larger focus on international continuity between regulatory practices for cryptoassets.