Cryptocurrencies have been steadily gaining in importance in the recent years, especially bitcoin as the most famous of all cryptocurrencies. The Swiss city of Zug was the first state authority worldwide to accept bitcoin as a legal tender. Since July 2016, it has been possible to pay fees of the residents’ registration office of up to 200.00 francs with bitcoins. Now the Canton of Zug has gone even further. Thus, it is permitted to establish companies in the Canton of Zug by using contributions in kind denominated in cryptocurrencies starting from September 2017. Below we summarize the key points you should know to set up a company using bitcoin denominated contributions in kind.
Bitcoins are often wrongly understood to comprise all cryptocurrencies. There are many other cryptocurrencies, such as Bitcoin Cash or Ether. From the conceptual point of view, all cryptocurrencies are digital currencies and operate in a very similar way. The currency itself is created by using the processing power of private computers. This takes place within an enormous global network, in which users control each other. There are no government bodies or authorities that would have any supervisory function or sovereign influence. Therefore, the unit price of a cryptocurrency depends on demand only. This generates stronger exchange rate fluctuations than in the case with national currencies.
Establishing a company by using contributions in kind is called qualified incorporation. Compared to (regular) cash, contributions in kind are more difficult to valuate. Therefore, higher requirements are applied. To set up a company using contributions in kind, you need a contribution in kind agreement, an incorporation report or an audit certificate, which have to be filed with the Commercial Register for verification.
Cryptocurrencies are subject to quite strong fluctuations. This may pose a challenge to capital funding. When registered with the Commercial Register, the value of the contribution in kind denominated in a cryptocurrency is converted into Swiss francs. If capital funding is insufficient due to exchange rate fluctuations, no incorporation takes place. For this reason, it is not possible to determine a premium or the part of the paid-up capital that exceeds the face value of shares beforehand. As the paid-up capital is determined in the course of incorporation, it is only then when the premium can also be precisely quantified.
As mentioned above, the Commercial Register of the Canton of Zug has been the first one to accept contributions in kind denominated in cryptocurrencies. Bitcoin, Bitcoin Cash and Ether are recognized by the Commercial Register of the Canton of Zug as they are. For other cryptocurrencies, some more information on their value and usability has to be submitted. Based on such information, the Commercial Register decides whether a contribution in kind is acceptable. However, according to official data, no such company has been established in the Canton of Zug so far, with contributions in kind expressed in cryptocurrencies.