This week we continue our series, this time we would like to present the legal regulations regarding cryptocurrencies introduced in Switzerland.

In January 2017, in Switzerland, a country known for its highly developed banking system, the Crypto Valley Association was founded. Its statutory goals included creating an ecosystem of talented individuals and startups around blockchain technology. Shortly thereafter, the canton of Zug, the birthplace of the association, earned the nickname "Crypto Valley," a spiritual successor to "Silicon Valley." In a 2018 report, the Financial Market Supervisory Authority deemed the existing legal framework sufficient to regulate blockchain-related instruments, while also demonstrating a positive attitude toward the new technology. Currently, Swiss cryptocurrency regulations consist of appropriately addressed Anti-Money Laundering and Know Your Customer procedures. The Swiss Financial Market Supervisory Authority (FINMA) is the equivalent of the Polish Financial Supervision Authority and oversees the functioning of the financial market, particularly banks, insurers, stock exchanges, and their participants. In 2018, the aforementioned authority issued guidelines regarding current market legislation and its appropriate application to various types of virtual goods. FINMA has categorized virtual currencies according to their function or purpose as:

• payment tokens (having only payment or investment properties),
• utility tokens (providing a service on the associated platform),
• property tokens (similar in nature to securities).

According to the "ICO Guidelines" issued in 2018, FINMA adheres to an approach some call "same business, same rules"—whereby new technology is treated no differently from existing traditional financial instruments as long as it serves the same purposes. Initial Coin Offerings are regulated in accordance with provisions relating to anti-money laundering, countering the financing of terrorism, banking law, and securities trading. AML and KYC guidelines vary depending on the token's characteristics (presented above). Similar to the solutions adopted in Malta, the most stringent restrictions apply to payment tokens and tokens that imitate securities in nature. To provide cryptocurrency exchange services in Switzerland, a license issued by FINMA, known as a "Virtual Asset Service Provider," is required. Obtaining a license requires completing a due diligence procedure in accordance with the regulations on counteracting money laundering and combating the financing of terrorism, while during the provision of services it is necessary to carry out a customer identification check each time in accordance with the applicable Anti-Money Laundering Act.

It's important to note at this point that legal and tax regulations vary by canton. Since February 2021, tax residents of the canton of Zug, the "Crypto Valley" mentioned earlier, have been able to settle taxes up to 100,000 francs using Bitcoin or Ethereum, one of the first initiatives of its kind in the world.

This alert is for informational purposes only and does not constitute legal advice.

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