Cryptocurrency projects in Switzerland

Switzerland is well-known for being one of the most crypto-friendly countries. Cryptocurrency projects can operate 100% legally here if they comply with the existing legislation, preventing financial crimes. The Federal Council is still concerned with the risks, related to trading, but registering a crypto exchange in Switzerland is not a problem. In fact, this country acknowledges the potential of blockchain technology and wants to form the most suitable environment for innovations. Thus, both ICOs and crypto exchanges are welcomed if they support anti-fraudulent practices.

There are different crypto licenses in Switzerland that can be obtained for doing legal business with cryptos. Depending on the nature of the project, it can be an exchange license, a banking license or a Fintech license, all of which are given by FINMA (Swiss Financial Market Supervisory Authority). The license is protecting both the project’s team and customers, contributing to the formation of a safe environment for crypto-related business.

Legislation and regulators of cryptocurrencies in Switzerland

Regulation of cryptocurrency and blockchain projects is done by FINMA. It publishes guidelines for various kinds of crypto projects to help them comply with the existing legislation. In 2018, FINMA formed a partnership with SIF (Swiss State Secretariat for International Finance) to elaborate on blockchain projects and offer changes to the existing legislation, embracing innovations even more than nowadays.

Regulatory treatment of cryptocurrency as asset or property is well-established in Switzerland. This means that cryptos are considered a form of wealth and are subjected to taxation. However, it should not be considered as an obstacle to doing business here, since the taxes are relatively low. It is recommended to seek for financial assistance to make sure that your company is paying taxes properly.

The Anti-Money Laundering Act can be called the crypto law in Switzerland. According to it, persons that store or allow transactions with assets are obliged to know their customers. These persons report to the Money Laundering Reporting Office if they have any suspicions about these customers, freezing the assets of people who were included in such a report. The law regulates activities of the following entities:

• Banks;
• Investment companies;
• Insurance institutions;
• Casinos;
• Fund managers;
• Securities dealers.

Most of cryptocurrency projects are investment companies, casinos, fund managers or securities dealers. Thus, they are under this regulation. However, in case your project is none of the above, you may be tax-exempt and not required to comply with the Anti-Money Laundering Act. An advisor can help you to define under which category your project should be.

Crypto regulations in Switzerland are becoming more and more open to blockchain projects. In particular, the Canton of Zug is famous for creation of the Crypto Valley Association that tries to make Switzerland the best country for cryptocurrency projects. Crypto Valley Association was founded only two years ago, but they already managed to gain support of the government as well as attract dozens of companies to do business under its guidance.

Working with cryptocurrencies in Switzerland

Swiss Federal Tax Administration treats cryptocurrencies as assets, which can be legally exchanged and used for various business activities. Everyone is allowed to work with cryptocurrency in Switzerland, but a crypto license has to be obtained for such purposes. Depending on a type of activities with cryptocurrencies, a crypto license can also differ, but FINMA can help to define an appropriate type.

Cryptocurrency projects in Switzerland have nothing to fear as long as they are not attempting to scam people or finance terrorism. FINMA is known for acting against fake cryptocurrency providers. It already shut down at least four suspicious companies, including the one that was providing E-coins which were stored on the company’s server rather than using blockchain. Some other companies are still under investigation.

Taxation of cryptocurrency projects in Switzerland

Profits from professional activity or salaries in cryptocurrency are subjected to cryptocurrency taxes in Switzerland. However, the exact taxes in Switzerland for cryptocurrency projects depend on whether a person is self-employed as a professional trader or a private investor, or if we are talking about a legal entity that deals with cryptocurrencies. In general, taxes are considered to be favorable for doing business in this country.

Operation of crypto exchanges in Switzerland

Switzerland is among the most suitable countries for registering cryptocurrency exchange. The Crypto Valley is a place worth considering because of the lowest taxes in comparison to other cantons in this country. A license for crypto exchange should be obtained from FINMA. The key requirement to get it is that an exchange has to prove compliance with anti-money laundering practices.

Crypto exchange in Switzerland must know their customers, keep track of transactions, identify and report anything suspicious. With a license for a crypto exchange, you can expect 12-18% corporate tax and safe operation in the country. It should be noted, though, that the process of obtaining the FINMA license for crypto ETP (Exchange Traded Products) can take up to one year.

Launching an ICO in Switzerland

ICO regulation in Switzerland is still under development. As of today, ICOs are evaluated by FINMA that defines the purpose of tokens (payment, asset or utility) and further regulations of the projects. Payment token is essentially electronic money. Cryptos that can be exchanged for goods and services fall under this definition. Assets tokens represent shares in the project. Their holders expect profit and might affect the decisions of the company as investors. If the token is used to access some functions of a smartphone application, it is a utility token.

The regulatory requirements of holding an ICO in Switzerland depend on its type. Payment ICOs must be compliant with anti-money laundering regulations. Utility ICOs and asset ICOs are both treated as securities and are regulated by the Swiss Code of Obligations.

To launch an ICO in Switzerland, it is recommended to contact FINMA in advance, explaining the main features of the project and asking whether a license for blockchain project is applicable in this case. As no legislation about ICOs specifically is available in Switzerland yet, financial and legal advisors can help to present the project properly to FINMA.