We are based in the so-called “Crypto Valley” and we support clients with all kinds of blockchain, crypto or FinTech projects from a Swiss regulatory, legal and tax perspective. In particular, we advise on:
- Structuring and strategy advice for FinTech companies/groups
- Compliance of new business models with regulatory requirements
- Initial Coin Offerings (ICO’s) or Token Generating Events (TGE’s), including representation in regulatory and tax approval proceedings before the Swiss Financial Market Authority FINMA and Swiss tax authorities
- Implementation of blockchain / crypto payment options
- Establishing crypto/fiat currency exchanges
- Establishment of legal entities with cryptocurrencies with support of our in-house notary publics
- Implementation of internal procedures to comply with anti-money laundering requirements
- Data protection policies for Fintech related businesses
Industry sectors of our blockchain / crypto clients
Our clients are active in a broad range of industry sectors. As such we are or have supported blockchain projects and ICO’s in connection with digital payment solutions, cryptocurrency exchanges, crypto bot investment advice, mobile gaming, digitalization of art, online retailers or solar power providers. Our lawyers support early stage start-ups and well established financial institutions.
Range of services
With the experience of our diverse team of lawyers, we can cover a very broad range of legal services. However, we understand that blockchain entrepreneurs not only need legal and tax advice. For this reason we have built up a network of investment advisors, banks, marketing, IT and AML/KYC service providers in order to offer the whole range of services that is usually needed to undertake a succcessful ICO or for a successful implementation of a blockchain project.
Regulatory framework for ICO’s in Switzerland
Switzerland is one of the leading ICO countries in the world by recent studies. In the Canton of Zug, the so called “Crypto Valley”, hundreds of crypto or blockchain related businesses have been established in recent years. With its established ecosystem, the Canton of Zug is generally the preferred place of business for ICO projects.
The Swiss Financial Market Supervisory Authoritiy (FINMA) recognizes the innovative potential of distributed ledger/blockchain technology and it generally welcomes and supports all efforts to develop and implement blockchain solutions in the Swiss financial centre (cf. para. 1 of the FINMA Guidance 4/2017).
ICO’s are currently not governed by any specific regulations in Switzerland. However, the Swiss Financial Market Supervisory Authority (FINMA) repeatedly stated that Swiss legislation on financial markets is principle-based, such as the principle of technology neutrality. Due to the underlying purpose and specific characteristics of ICOs, various links to current regulatory law may exist depending on the structure of the services provided.
Classification of tokens
In assessing ICO’s, FINMA focuses on the economic function and purpose of the tokens (i.e. the blockchain-based units) issued by the ICO organiser. The relevant factors are the underlying purpose of the tokens and whether they are already tradeable or transferable at the point in time of issuance. FINMA generally categorises tokens into the following three main types (cf. FINMA Guidelines dated 16 February 2018, hybrid forms are possible):
Payment tokens are synonymous with cryptocurrencies and have no further functions or links to other development projects. Tokens may in some cases only develop the necessary functionality and become accepted as a means of payment over a period of time (for example after a certain virtual platform becomes operational and goods and services from third parties can be bought with the tokens). The issuance of payment tokens is generally subject to Swiss anti-money laundering regulations since anyone who provides payment services or who issues or manages a means of payment is considered a financial intermediary subject to the Swiss anti-money laundering act (Art. 2 para. 3 let. b AMLA).
Such tokens are intended to provide digital access to an application or service. Only if a utility token functions solely or partially as an investment in economic terms, FINMA will treat such tokens as securities. This may also be the case if a blockchain-based technology or platform is not yet operational at the point in time when the tokens are issued. Anti-money laundering regulations are generally not applicable as long as the main reason for issuing the tokens is to provide access rights to a non-financial application of blockchain technology.
Asset tokens represent assets such as participations in real physical underlyings, companies, or earnings streams, or an entitlement to dividends or interest payments. In terms of their economic function, the tokens are analogous to equities, bonds or derivatives. FINMA considers asset tokens generally as securities (assuming they are suitable for standardized mass trading, such as ERC20/223/777 and comparable token on the blockchain), which means that securities law requirements for trading in such tokens, as well as civil law requirements under the Swiss Code of Obligations become applicable. Furthermore, the issuance of asset tokens should generally not trigger the application of AML-regulations (no financial services or payment instrument).
It should be noted that the individual token classifications are not mutually exclusive. Asset and utility tokens can also be classified as payment tokens (referred to as hybrid tokens). In these cases, the requirements for the issuance in connection with an ICO are cumulative; in other words, the tokens are deemed to be both securities and means of payment. In addition, the regulatory treatment may be different in connection with pre-financing or pre-sale rounds of ICOs.