On February 16, Switzerland's financial regulator, the Swiss Financial Market Supervisory Authority (FINMA), issued guidelines (embedded below) explaining how ICOs will be regulated in the crypto-friendly country.
In September 2017, the regulatory body issued preliminary guidance [PDF] suggesting that some laws already on the books might pertain to ICO regulation, and stated that it would conduct research into the legality of the offerings. The guidelines put forth today are the fruit of that research, according to a press release.
The document describes digital assets as falling into one of four categories: payment tokens, utility tokens, asset tokens, and hybrid tokens.
Payment tokens "are intended to be used, now or in the future, as a means of payment" and "give rise to no claims on their issuer." As long as they "can be transferred technically on a blockchain infrastructure" during the ICO or at any time after, their issuance is subject to regulation under the Anti-Money Laundering Act (AMLA), which aims "to protect the financial system from money laundering and the financing of terrorism."
Utility tokens "are intended to provide access digitally to an application or service by means of a blockchain-based infrastructure" and are not subject to securities laws nor to the AMLA, so 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 a debt or equity claim on the issuer," making them similar in economic function to "to equities, bonds or derivatives." The category also includes cryptocurrencies backed by physical assets. FINMA considers these to be securities.
Hybrid tokens contain features of more than one of these categories, and are subject to all regulations that apply. For example, a utility token with payment token characteristics would be regulated under the AMLA.
Each case, the press release states, "must be decided on its individual merits."
Tokens made available for purchase during a presale, or that have in any other way been sold before the cryptocurrency has actually been minted, will be considered securities across the board. The guidelines explain that securities regulation "is intended to ensure that market participants can base their decisions regarding investments … on a reliable and defined set of information."
Additionally, "the exchange of a cryptocurrency for fiat money or a different cryptocurrency falls under" the purview of the AMLA.
Anti-money laundering standards require that the entity issuing the tokens either joins a "self-regulatory organization" or submits "directly to FINMA supervision." Alternatively, the issuer can have "the funds accepted via a financial intermediary who is already subject to the AMLA in Switzerland and who exercises on behalf of the organiser the corresponding due diligence requirements."
FINMA's latest guidelines run somewhat parallel to a July 2017 report from the US Securities and Exchange Commission, which found that some virtual currencies can be classified as securities.
Below are the guidelines that were released today: