Swiss financial regulators publish a guide to ICO's

About a quarter of ICO's are held in Switzerland. This new way of financing projects continues to gain popularity, and the Swiss Financial Market Supervision Authority () has published a press release...

About a quarter of ICO's are held in Switzerland. This new way of financing projects continues to gain popularity, and the Swiss Financial Market Supervision Authority (FINMA) has published a press release describing the principles for considering applications for an ICO. The regulators will consider all projects based on their individual merits. FINMA will focus on the economic function of tokens and the purpose of their release. The rules are based on the ongoing fight against money laundering. FINMA also determines what information should be provided by projects that decide to enter into an ICO.

What are the differences between different ICO's?

Today there is no international or national classification of tokens and ICO's. FINMA proposes to separate tokens into three types: payment, utility, and asset tokens. The type of tokens produced is what characterizes the ICO.

Payment tokens are essentially a synonym for a cryptocurrency and serve as a means of payment within a certain period of time. Such tokens are not securities so FINMA only requires them to comply with the law on combating money laundering.

Utility (utilitarian) tokens serve to provide access to an application or service. If tokens also perform the function of an investment instrument, then FINMA will treat them as securities just as they do with asset tokens.

Tokens of assets are similar to shares, bonds, or derivatives and give the right to a portion of physical assets or to interest from the company's income. FINMA considers asset tokens as securities and applies existing laws to them.

Focus on combating money laundering

Swiss law requires that the identity of the owners of companies and the profit recipients of be known. FINMA notes that existing laws protect the financial system from being used for money laundering and the financing of terrorism. Risks associated with money laundering are particularly high in a decentralized system based on blockchain, since assets can be transferred anonymously and without regulated intermediaries.

Innovation potential and financial risks

FINMA participates in the workgroup of the federal government working on blockchain and ICO's, whose goal is to develop rules that ensure fair and reliable trade for those who want to use the innovative potential of blockchain technology. The laws should protect investors and the integrity of the financial system and at the same time provide market participants with the opportunity to make investment decisions based on a minimum amount of reliable information.

The regulators paid attention to the risks that ICO's could pose to investors. These tokens are subject to high price volatility. Many projects go to an ICO at an early stage of development or even without a ready product or technology. This creates uncertainty in the development of the project and reduces investor confidence. In addition, it is not clear whether the contracts that use blockchain technology are legally binding according to civil law.