GENEVA: Switzerland’s market watchdog released new guidelines Friday to govern crypto-currencies, as the high-tech Alpine nation emerges as the main global hub for the flourishing industry.
Watchdog FINMA noted that Switzerland has seen a “sharp increase” in the number of Initial Coin Offerings (ICOs) applying to base their operations in Switzerland.
While some countries have shied away from the unpredictable crypto-currency sector, Switzerland appears to be embracing the opportunity.
FINMA’s new guidelines concede that the regulatory framework for digital currencies is still taking shape, but the rules aim to set out some basic principles to create “clarity for market participants”, a statement said.
“Creating transparency at this time is important given the dynamic market and the high level of demand”, FINMA said.
Given the huge variety in the types of new products being generated, FINMA said that new companies “must be considered on a case-by-case basis”, noting that “financial market law and regulation are not applicable to all ICOs”.
But for starters, FINMA said it intends to divide ICOs into three categories: “payment tokens”, “utility tokens” and “asset tokens”.
Payment tokens are defined as the basic form of crypto-currency, which have value and may be used as a means of payment.
Category two, utility tokens, are “intended to provide digital access to an application or service”, FINA explained.
Asset tokens have been defined as similar to stocks or bonds — where the currency corresponds to “assets such as participations in real physical underlying, companies, or earnings streams, or an entitlement to dividends or interest payments”, FINMA said.
The watchdog said that the key objectives of the new guidelines was to have a “balanced approach”, where the risks of ICOs are managed but the “innovative potential” of the industry is allowed to thrive.
Among the major risks facing those who put money in ICOs — or any currency that uses blockchain technology — is heightened market volatility, as shown by the spectacular swings in bitcoin’s value in recent weeks.
Crypto-currencies have also been closely linked to money laundering, which FINMA has vowed to combat, along with any attempt to use the new products to finance terrorism.
“Money laundering risks are especially high in a decentralised blockchain-based system, in which assets can be transferred anonymously and without any regulated intermediaries”, FINMA said.