How Switzerland is adapting its regulation on cryptocurrency

The regulatory guidelines for Bitcoin in Switzerland are currently being adapted. The revised regulation should help bring stability in an otherwise notoriously volatile space.

Switzerland has rapidly been cementing itself as one of Europe’s most technologically advanced nations – it even has its own Silicon Valley known as ‘Crypto Valley’.

Adapting regulation is a vital part in promoting mainstream adoption for crypto and blockchain. Without revised regulatory guidelines, companies and projects do not have room to grow.

In this article, we discuss how Switzerland is adapting its regulation on cryptocurrency.

Bitcoin in Switzerland

In March 2019, Switzerland’s federal assembly – the federal legislature of the Swiss parliament – approved a motion to relax its regulation on crypto.

The motion was passed by 99 votes to 83, with a further 10 members opting to abstain from voting.

The motion requests that the federal council adapt the provisions on procedural investments of the judicial and administrative authorities so that they can be applied to crypto.

Members of the assembly argued that Switzerland needed to close the gap in terms of protection against crypto abuse. Their case centred on the premise that in a decentralised, peer-to-peer network, anybody could obtain crypto.

By default, people with ill intentions could then use this as a window to commit illicit activities such as extortion or money laundering.

It is Switzerland’s hope that by adapting existing laws and regulations, clarifications will be made regarding crypto trading platforms and whether they should be subject to regulation by financial watchdog the Financial Market Supervisory Authority (FINMA).

FINMA guidelines 

Back in December 2018, FINMA published a set of guidelines for fintech companies.

It was announced that from 2019 onward, interested parties can apply for a new fintech licence which is granted by FINMA.

The guidelines published had the aim of simplifying the licence application process.

The announcement read: “To boost innovative financial companies, the Swiss parliament has introduced the new fintech licence – a licence with relaxed requirements.”

The fintech licence allows institutions to accept public deposits of up to 100 million Swiss francs on the condition that the public deposits are not invested and no interest is paid on them.

An additional requirement is that an institution with a fintech licence must have its registered office and conduct its business activities in Switzerland and cannot be based in another country.

FINMA will be supervising institutions who obtain the licence. Interested parties also have the opportunity to present their project to FINMA in a meeting ahead of submitting their application.

The simplified requirements will be fleshed out by amendments to the Banking Ordinance, the Auditor Oversight Ordinance, and the FINMA Fees and Charges Ordinance. This process began on January 1, 2019.

Exchange-traded product (ETP)

In late 2018, Switzerland’s main stock exchange gave the green light for the world’s first cryptocurrency exchange-traded product (ETP).

The Amun Crypto Basket ETP encompasses multiple cryptocurrencies and was first made available for trading on the Six exchange based in Zurich.

It was designed to track an index based on the price movements of the top five crypto projects.

Back when it was introduced, this meant just slightly under half of the ETP’s assets were invested in Bitcoin, with the remainder being divided between XRP, Ethereum, Bitcoin Cash, and Litecoin.

The ETP was believed to carry an annual management fee of 2.5%.

The ETP ticker (the abbreviated name for an asset, such as BTC for Bitcoin) is ‘HODL’, which is a nod to a popular phrase in the crypto space ‘hold on for dear life’.

The move was particularly interesting considering the Securities and Exchanges Commission (SEC) in the USA has been regularly rejecting ‘exchange-traded fund’ (ETF) proposals.

For example, back in the summer of 2018, the Winklevoss twins had an ETF rejected for their Gemini exchange by the SEC.

This marked their second attempt at getting an ETF accepted, which would have been the first-ever crypto ETF on a regulated exchange.

Switzerland adopting a crypto ETP marked a significant step toward cementing itself as a leader in crypto regulation.

Interested in reading more Switzerland-related crypto news? Discover how Swiss private bank Julius Baer has partnered with SEBA to launch crypto services in 2019.