Switzerland was among the first to see crypto’s potential, becoming a hub for blockchain activities and those interested in the technology. Canton Zug, often referred to as the “Crypto Valley”, was recently ranked the third city in the world in terms of startup funding volume in H1 2018 .
Despite the inflow of crypto business, restrictive bank policies toward crypto companies forced them to look elsewhere abroad to qualify for corporate accounts and other financial services.
Opening an account poses various challenges for banks, because the new blockchain technologies can also be associated with risks, especially in relation to money laundering.
In an effort to maintain the status of Switzerland as a cryptocurrency mecca, the Swiss Bankers Association (SBA) issued guidelines, which aims to foster the cryptocurrency startups and prevent them from moving abroad for banking services . The publication of this guide is welcomed by the Federal Department of Finance (FDF) and the Swiss Financial Market Supervisory Authority (FINMA).
The guidelines are intended to help banks in taking a differentiated approach to account opening, depending on the nature of the connections that the company has with blockchain technology. Companies are classified in the guidelines according to their relation to the token issuance (ICOs) and the nature of corporate financing. This means that the most comprehensive requirements apply to the documentation for companies that finance an ICO via cryptocurrencies.
In short, companies whose business model has links to blockchain technology but that do not use this for corporate purposes should be treated similarly to other regular customers opening an account (small and medium enterprises – SME). Companies have to demonstrate that they are aware of and follow all regulations applicable to their business models.
Companies that raise capital for corporate financing by issuing tokens using blockchain technology can do so in the form of fiat or cryptocurrencies. For companies whose ICOs are funded with cryptocurrencies, higher and additional requirements apply, whether or not they are subject to the Anti-Money Laundering Act. The published guidelines recommend that the ICO organizer should apply the relevant Swiss standards to the fund’s origin and money laundering when accepting cryptocurrencies under an ICO. It is also proposed that the acceptance of cryptocurrencies under ICOs should be treated as a minimum in the same way as a cash transaction.
It should be mentioned that the guidelines outline series of checks that banks should complete when opening a bank account for blockchain activity, including Know Your Customer (KYC) and AML checks for companies that have completed ICOs in both cryptocurrencies and fiat currencies.
Regardless of whether the financing is for the issuance of tokens or shares – KYC obligations (eg, Benefit Ownership) exist when financing through fiat currencies as with a regular account opening. In this context, ICO participants/investors must identify beneficial owners in accordance with the AML.
The guidelines do not define binding minimum standards. Institution-specific instructions issued by SBA members will take precedence. Each bank is responsible for its own business activities.
To sum everything up, the guidelines should assist banks in understanding what requirements they should apply, but will also help blockchain and cryptocurrency firms understand what information they must provide, and what measures they must take in order to open an account.
By issuing these guidelines, the SBA is promoting the optimum working environment to support a diverse Fintech system. Corporate bank accounts are an essential infrastructure service, and banks have an interest in doing business in this fast-growing area. At the same time, the applicable due diligence obligations are binding, and there is no automatic right to open an account. The integrity and reputation of the Swiss financial centre must remain the top priority for all market participants.
1. Crypto Valley Zug Ranks Third in Startup Funding Report, from 19.09.2018 http://fintechnews.ch/blockchain_bitcoin/crypto-valley-zug-ranks-third-in-startup-funding-report/22240/
2. Leitfaden der SBVg zur Eröffnung von Firmenkonti für Blockchain-Unternehmen.