Crypto Exchange License in Switzerland under FINMA

Switzerland’s Framework for Cryptocurrency Regulation

Switzerland has established a robust legal framework for cryptocurrency through the DLT (Distributed Ledger Technology) Act, which sets forth comprehensive guidelines for the operation of crypto businesses.

DLT Act

Mandates regulations for obtaining a Switzerland cryptocurrency license, crypto trading, anti-money laundering (AML) compliance, and the financial infrastructure for cryptocurrency transactions.

Role of Swiss National Bank

Acts as the guardian of financial market stability, overseeing DLT trading facilities and payment systems as per the Financial Market Infrastructure Act, and ensuring companies can manage risks to financial stability.

AML Compliance for Crypto Companies

1. Anti-Money Laundering Act
2. Anti-Money Laundering Ordinance
3. FINMA Anti-Money Laundering Ordinance

These regulations apply to activities like client asset transfers, currency exchanges, and other financial services within the crypto sector.

Regulated Crypto Tokens

Payment Tokens: For transferring monetary value (e.g., Bitcoin, Ether).

Asset-backed Tokens: Represent real assets, typically issued for fundraising.

Debt Tokens: Require issuer repayment plus interest.

Equity Tokens: Offer holders entitlement to cash payments without repayment.

Participation Tokens: Grant a share in future profits.

Utility Tokens: Provide access to a digital service, not needing a license unless classified as securities.

ICO Regulations

Depending on the token type, payment tokens must comply with AML laws, while asset-backed and utility tokens follow securities regulations under the Swiss Code of Obligations.

Main Types of Licenses for Cryptocurrency Business in Switzerland

A cryptocurrency license in Switzerland is crucial for ensuring security and regulatory compliance by both providers and their clients in the cryptocurrency sector. The Swiss Financial Market Supervisory Authority (FINMA) oversees the issuance of these licenses, each of which is designed for specific activities in the cryptocurrency ecosystem:

• The Fintech license is popular among financial intermediaries, and this license allows them to hold public deposits of up to CHF 100 million without the requirement to invest or pay interest on these deposits.
• The Investment Fund License authorizes fund managers to manage collective investment funds on behalf of investors.
• The banking license allows financial institutions to offer both traditional and cryptocurrency-related services, such as custody and trading of cryptocurrencies.
• A securities dealer license is required for companies that issue, trade, or broker security tokens and other financial instruments on the blockchain.
• The DLT Trading Platform License was introduced by the DLT Law in 2021 and allows the operation of trading platforms for securities and other assets based on the DLT distributed ledger technology.
• A payment system license will be required for companies that use the blockchain to manage payment systems, including stablecoin issuers and decentralized exchanges.

Obtaining Crypto Licenses in Switzerland and Slovakia

Speaking about Switzerland, first of all, you need to have a local company, develop a detailed plan, comply with the law, taking into account the required capital of at least 20,000 Swiss francs to obtain cryptolicense in Switzerland. Residents of the country must be in the key management, as well as adhere to strict risk management. In addition, cooperation with FINMA is required.

On the other hand, considering Slovakia, in order to obtain a license, the applicant will need a business plan and a capital of 5000 euros. It is also necessary to take care of the verified documents of the main individuals, as well as proof of the good reputation of the owners and residency. Several proposed company names and a special corporate bank account are also required.

Requirements

Securing a crypto license Switzerland requires meeting specific criteria:

1. Formation of a recognized business entity, such as a joint stock company or limited liability company, within Switzerland.
2. Submission of a comprehensive plan detailing the business’s aims, target market, offerings, risk management, and adherence to governance standards.
3. A minimum of CHF 20,000 in capital to mitigate operational and financial risks.
4. Development of a robust framework for effective oversight, management, and reporting.
5. Maintenance of a registered office and management by at least one Swiss resident, including a resident AML Officer.
6. Implementation of stringent risk management practices and internal auditing procedures.
7. Full compliance with Swiss laws and regulations, including collaboration with the Swiss Financial Market Supervisory Authority (FINMA).

Step-by-Step Guide to Acquiring a Crypto License in Switzerland

1. Initial Document Collection

• Proof of residence for directors and shareholders.
• Selection of a company name.
• Passport copies for all shareholders and directors.
• Power of attorney.
• Detailed business model description.
• Company structure outline.

2. Company and Team Formation

• Registration of the company.
• Preparation of corporate documents.
• Hiring of an AML Officer and a Local Director.
• Signing of office lease agreement.

3. Licensing Procedure

• Preparation and submission of the licensing application documents.
• Drafting of AML/KYC policies.
• Ongoing communication with the Self-Regulatory Organization (SRO) until approval.

4. Corporate Account Opening

• Evaluation and selection of suitable Banks/EMIs based on the client’s risk profile and AML policies.
• Collection of necessary documentation for account opening.

Establishing a Crypto Company in Switzerland

If you want to obtain cryptolicense in Switzerland, you need to launch a local business, taking into account a number of important steps aimed at integrating companies into the legal and financial system. Depending on the chosen business structure and the quality of documents, this process can take up to 4 months. The best options for crypto activities are the Limited Liability Company (GmbH) and the Company Limited by Shares (AG). In both cases, you can have a single shareholder who does not have to be a Swiss citizen but must have a residence permit and a business license.

Key steps and requirements

1. Notarial deed signing for GmbH or AG establishment costs 1,500–2,000 CHF, including notarial fees.
2. At least one shareholder and board member, meeting fitness and propriety criteria.
3. An auditor, a Swiss corporate lawyer, and designing AML policies are essential.
4. A registered office, local staff employment, and the possibility of holding a corporate bank account abroad.
5. GmbH requires 20,000 CHF; AG needs 100,000 CHF with specific portions deposited or contributed in assets.
6. Founders’ IDs, residence permits, rental agreements for office space, company bylaws, and specific declarations related to asset contributions and real estate purchases.

Incorporation

1. Register the company name via EasyGov to obtain a UID and ensure name uniqueness through the Central Business Name Index.
2. Open a Swiss bank account for the initial capital deposit. If capital surpasses 1,000,000 CHF, a 1% Stamp Duty applies.
3. Utilize guidelines for blockchain companies to open corporate bank accounts.
4. Engage a notary for document verification, company registration application, and post initial capital proof.
5. Register with the Commercial Register if turnover exceeds 100,000 CHF and with tax and social insurance authorities.
6. Secure business insurance and apply for the necessary Switzerland license crypto from FINMA.

Cryptocurrency License Tax Overview

The taxation of cryptocurrency activities in Switzerland is based primarily on the economic nature and tax residency of the entity. Cryptocurrencies are not subject to conventional foreign exchange laws, as they are recognized as assets and are taxed accordingly. Below are the key factors affecting tax liabilities:

• Residents are taxed on global income, while non-residents are taxed only on income earned in Switzerland.
• The country has a multi-level tax structure. It is distributed among the Federal Tax Administration (FTA), cantons, and municipalities, with federal rates being fixed and cantonal rates being variable.

Taxes of different levels for cryptocurrency license holders

1. Income tax – 35%.
2. Corporate income tax (CIT) ranges from 11.9% to 21%, with the federal CIT rate being 8.5% after deductions.
3. Value-added tax (VAT) is 7.7%.
4. Social security contributions range from 0.5% to 5.3%.
5. Stamp duty is 1%.
6. Capital gains tax (CGT) ranges from 0.001% to 0.5% and is applied at the cantonal level for specific types of cryptocurrency activities.

Key benefits and considerations

1. ICO capital is not taxed as income.
2. The issuance of new tokens does not result in the payment of capital gains tax.
3. Payment tokens can be treated as securities. If they are not tradable, transactions with them are exempt from VAT.

Switzerland’s double taxation treaties (over 100) help prevent double taxation of foreign income, with potential tax benefits for companies doing foreign business, offering rates ranging from 7.83% to 11% on foreign-sourced income.

FAQ

How much money should I prepare to get a Swiss crypto license?

It all depends on the type of license you want to obtain. In addition, the size and legal form of the company and other aspects are taken into account. Let’s take a look at what exactly the cost includes:

• State fees.
• Application fee.
• Accounting and legal fees.
• Annual supervision fee.
• The cost of company registration.
• Accounting and legal costs.

To apply for a license for cryptocurrency exchange in Switzerland costs 20,000 Swiss francs and more.

What difficulties can a crypto entrepreneur face in Switzerland?

Sometimes, there may be failures in the preparation and collection of documentation. Inadequate reporting is also a common cause of delays. Documents must be submitted in English, and in other cases, they must be submitted with notarized translations. To ensure that everything goes as smoothly as possible, we recommend contacting experienced crypto lawyers.

How to declare cryptocurrency in Switzerland?

This process can be somewhat complicated, as the taxation of cryptocurrencies differs depending on various factors, including trading, mining, investing, or other situations. With Prifinance’s experts, you will not have to worry about this issue due to our full understanding of local tax law.

Is it possible to make a share capital contribution in cryptocurrency?

This possibility exists depending on the local legislation in some cantons (administrative units) located in the country. This is possible in Zug’s famous financial center, which is home to the renowned cryptocurrency valley. So, in this canton, you can make a contribution in bitcoins.