Due to the sharply increased number of ICO projects in Switzerland, on February 16, 2018, the Swiss financial markets supervision service (FINMA) published principles supplementing the previous version of the ICO Manual, published in September 2017. The Swiss law firm Goldblum and Partners, serving the organizers of the ICO, helped us to understand the document.
According to the document, the ICO conformity assessment with the requirements of the legislation on regulation of financial markets, in particular the law on combating money laundering (Anti-Money Laundering Act — AMLA), should be carried out in each individual case.
In assessing the ICO, the financial regulator will take into account the functions of tokens and the ability to trade or transfer them. FINMA has identified three groups of tokens:
Payment tokens (cryptocurrencies). Such tokens have no other function than a means of payment, or connections with other projects.
Utility tokens that provide access to an application or service.
Asset tokens are treated as assets with a real financial component upon receipt of income from their placement in the form of dividends or interest after their acquisition. In this case, they are similar to shares, bonds or derivatives.
Based on this classification, FINMA considers the ICO as follows:
Payment ICOs: if the token has the functions of a payment instrument, the requirements of the regulator are reduced to compliance with the legislation on money laundering. Cryptocurrency is not considered a security.
Utility ICOs: such tokens are not considered securities if their sole purpose is to provide access to the service or application, and if the token can be used in this way since its issuance. On the other hand, if tokens are solely or partially an investment, FINMA will treat them as securities.
Asset ICOs: Tokens are securities, and this means that their sale must comply with the rules of civil law, as well as the requirements of the Law on securities. Among other things, this means that the ICO must follow the rules that apply to advertising materials and provide information to investors adequately.
FINMA also recognizes the existence of hybrid ICO forms, for example, if utility tokens can be used as a means of payment. In doing so, ICO must comply with anti-money laundering legislation.
The wording and content of the Manuals have been published by the ICO makes clear that FINMA extremely concerned about compliance with the Law on combating money laundering. The concern of the regulator of course, because when you use the blockchain-the financial risks are growing. In fact, transactions can take place anonymously and without the use of an accredited financial intermediary.
The regulator's attention was also focused on securities legislation, for example, the obligation to provide reliable and true information, which is especially important, since tokens are subject to significant price volatility.
The published Guide has once again confirmed FINMA's interest in the potential of blockchain technologies and the need for a clear, but balanced approach to the regulation of this innovative sphere. FINMA is part of the Working group on the blockchain and ICO created State Secretariat for international financial matters. By the end of 2018, the working group should develop a framework and a legislative approach to ICO and blockchain.