We offer regulatory, corporate and tax advice specifically on FinTech, cryptocurrencies and ICOs/TGEs. Andrea Huber and Lea Hungerbühler answer 5 important questions from a Swiss point of view.
1. What is are the biggest legal challenges facing FinTech companies conducting an initial coin offering / token generating event (ICO / TGE) and/or working with cryptocurrencies?
With respect to FinTech, we always face challenges from different aspects, namely legal, regulatory, tax and cybersecurity. For this reason, it is of utmost importance to make a profound legal assessment and liaise with the competent tax authority and the Swiss Financial Market Supervisory Authority (FINMA) already at an early stage of the project.
2. Can an ICO be structured in a way that is compliant with Swiss financial market law? If yes, what are the regulatory criteria and requirements for such a "legally compliant" ICO under the Swiss banking act, stock exchange act, financial market infrastructure act and anti-money laundering act?
Certainly. FINMA very recently issued guidance regarding token sales/ICOs. Specifically, FINMA pointed out that each ICO may be different from a technical, functional and economical point of view so that it needs to be analyzed on a case by case basis.
As most of the other countries, Switzerland does not have ICO specific regulation as the Swiss financial market law is considered to be neutral from technology so that general Swiss law provisions apply. Depending on the features of the business model, the Anti-Money Laundering Act, Banking Act, Financial Infrastructure Act, Stock Exchange and Securities Trading Act or the Collective Investment Schemes Act need to be taken in consideration. In addition to that, also tax questions as well as private law issues should not be neglected.
3. What is the role of the Swiss government in regulating these companies and their activities?
Due to the rapid development of blockchain technologies in Switzerland, the Swiss government should take a proactive, careful approach with respect to ICO regulation, always taking into account the international developments. Switzerland needs to maintain its reputation as a strong, innovative financial center.
4. What are some of the tangible differences in regulation in Switzerland versus outside of Switzerland?
In contrast to most other jurisdictions, an ICO can be launched in Switzerland with a high level of legal certainty: First, there is a guidance issued by FINMA which provides some information on how to structure an ICO in compliance with the Swiss regulatory framework. Second, FINMA reviews specific enquiries of ICO projects and confirms whether or not specific financial markets laws apply or licensing requirements are triggered. Such confirmation enables to launch an ICO without high legal or regulatory risks.
5. Is the Swiss legal framework robust enough to adapt to the age of digital currencies, or will major legal changes be required?
As the law is always a little behind new technologies, it will take certain time until new regulation will come into play. By way of example, it is not clear yet how tokens are to be qualified for private law purposes and hence how they can be transferred and assigned from one token holder to another one. Current private law might need to be amended in order to provide a satisfying answer to such questions.