Switzerland has long been considered a crypto-friendly jurisdiction with a comprehensive regulatory framework that prioritizes a balance between innovation and financial stability. The country’s approach is unique, relying heavily on a distinction between different types of licenses and a system of Self-Regulatory Organizations (SROs) for many crypto-related activities.
Governing bodies and key history
The Swiss Financial Market Supervisory Authority (FINMA) is the main regulatory body for crypto-assets. FINMA is responsible for prudential supervision and for ensuring a risk-adequate treatment of financial services. Its goal is to find the right balance between openness to innovation and the protection of the financial market and investors.
Rather than creating a separate, specific law for crypto assets, Switzerland has integrated their regulation into existing financial laws. A key piece of legislation is the Anti-Money Laundering Act (AMLA), which applies to financial intermediaries, including many crypto-asset businesses. In 2021, Switzerland also enacted the Digital Ledger Technology (DLT) Act, which created a clear legal framework for blockchain assets and a new licensing category for DLT trading facilities.
FINMA’s approach is characterized by a flexible licensing system. For many “para-banking” activities, firms can operate by becoming a member of a Self-Regulatory Organization (SRO), which is a private entity supervised by FINMA. SRO membership ensures compliance with AML laws without the higher burden of a full financial license.
The most recent text definition of key items
- Crypto Asset: FINMA defines crypto assets as “digital assets that are usually recorded on a blockchain” and are accessible only with cryptography. FINMA categorizes these assets based on their economic purpose, distinguishing between three types of tokens:
- Payment tokens: Intended to be used as a means of payment for goods and services or for value transfer. These do not give rise to any claims against an issuer or a third party.
- Utility tokens: Grant access to a digital, non-financial good or service.
- Asset tokens: Represent assets like shares, bonds, or claims against an issuer, and are treated similarly to traditional securities.
- Virtual Asset Service Provider (VASP): In Switzerland, the term VASP covers a range of businesses that operate with virtual assets, including the classic purchase and sale of cryptocurrencies, as well as the storage, transfer, or exchange of tokenized assets like precious metals. The AMLA defines financial intermediaries as entities that “professionally accept, hold, invest, or transfer assets belonging to others”. This broad definition brings many crypto businesses under its scope.
- Stablecoins: FINMA has issued specific guidance on stablecoins, which are generally classified as deposits under banking law or as collective investment schemes, depending on their underlying assets and management structure.
The key elements of their regulation
Switzerland’s regulatory framework is characterized by a tiered and risk-based approach.
- SRO Model: For many crypto businesses, the primary compliance pathway is not a direct license from FINMA, but rather membership in an SRO. These organizations ensure their members adhere to AML/KYC standards through internal policies and regular audits. There are currently 11 SROs recognized by FINMA, with the choice depending on the company’s specific needs and specialization.
- Travel Rule Compliance: Switzerland was one of the first countries to apply the FATF’s “Travel Rule” recommendations to VASPs in 2019. Swiss regulations mandate that VASPs collect and transfer originator and beneficiary information for all crypto transactions, regardless of their value, a stricter standard than in many other jurisdictions.
- Staking Services: FINMA’s guidance on staking, issued in late 2023, clarifies that providers holding client assets on individual addresses do not require a FinTech or banking license, but remain subject to the AMLA. However, if client assets are pooled on a common address, the provider is deemed to be in “collective custody” and must obtain a banking license.
- Taxation: In general, capital gains on crypto assets are tax-exempt for individuals. For tax assessment, cryptocurrencies must be converted into Swiss francs.
Requirements for the VASP
The requirements for a VASP in Switzerland depend on the nature of its business and its licensing pathway.
- SRO Membership: To join an SRO, a VASP must establish a Swiss legal entity, secure a local office, develop internal AML policies, appoint a compliance officer, and prepare for regular audits. The process is typically faster and less burdensome than obtaining a full license.
- Licensing: Certain activities require a full license from FINMA. For instance, a FinTech license is sufficient for businesses that hold client funds for up to 60 days and do not require a full banking license. A full banking license is necessary for activities like accepting public deposits on a commercial basis or offering collective custody of client funds.
- AML/CTF Obligations: All financial intermediaries, including VASPs, must adhere to the AMLA. This includes verifying customer identity, establishing the beneficial owner, and monitoring business relationships.
- Self-Hosted Wallets: Swiss regulations impose strict requirements on transfers involving self-hosted wallets. VASPs must verify the identity of the wallet owner and prove their control over the assets using “technical measures” before processing the transaction.
What it means for the stakeholders
- Financial Institutions: The regulatory framework provides a clear path for traditional financial institutions to engage with digital assets. However, offering services like staking may subject them to specific licensing and balance sheet requirements.
- Investors: The strict AML/KYC and Travel Rule requirements, even for small transactions, provide a high level of security for investors. However, this also means that anonymous transfers are prohibited.
- VASPs and Startups: The SRO model offers a highly accessible entry point for new ventures, allowing them to quickly go to market and establish a compliant foundation without the high costs and long timelines of a full license. This flexibility is a key advantage for companies building traction. For more ambitious projects, the SRO model can be a stepping stone to a more complex license, such as a FinTech or banking license.
Useful Links
- Swiss Financial Market Supervisory Authority (FINMA): https://www.finma.ch/en/
- FINMA Fact Sheet: Cryptoassets: https://www.finma.ch/en/~/media/finma/dokumente/dokumentencenter/myfinma/faktenblaetter/faktenblatt-kryptobasierte-vermoegenswerte.pdf?sc_lang=en&hash=C301BDEC9A7DED4EF2E23634B86F8FEF
- FINMA Guidance 02/2019 – Payments on the blockchain: https://www.finma.ch/en/~/media/finma/dokumente/dokumentencenter/myfinma/faktenblaetter/faktenblatt-kryptobasierte-vermoegenswerte.pdf?sc_lang=en&hash=C301BDEC9A7DED4EF2E23634B86F8FEF
- FINMA Guidance 06/2024 – Stablecoins: https://lindemannlaw.ch/en/insights/finma-2024-stablecoin-guidelines-key-insights-for-your-business/
- FINMA Guidance 08/2023 – Staking: https://www.lenzstaehelin.com/news-and-insights/browse-thought-leadership-insights/insights-detail/finma-clarifies-its-practice-on-the-staking-of-digital-assets/
