Following a sharp increase in the number of initial coin offerings (ICOs) taking place in Switzerland, yesterday the Swiss Financial Market Supervisory Authority (FINMA) published a series of guidelines that integrate the FINMA Guidance 04/2017, issued earlier last year.
According to the guidelines, ICOs need to be assessed case-by-case to evaluate whether they comply with the requirements of the financial market regulation, in particular with securities rules and the Anti-Money Laundering Act.
When assessing the ICOs, FINMA will consider the function of the tokens and whether they are already tradeable or transferable. FINMA categorises tokens into three different groups:
On the basis of this classification, FINMA’s Guidelines consider each ICO in the following terms:
FINMA also admits that ICOs may exist in hybrid form – for instance, if utility tokens can be used as a form of payment, the ICO would need to comply with anti-laundering regulations.
It appears clear that FINMA is particularly concerned about the compliance of certain types of ICOs with the Anti-Money Laundering Act. In a blockchain system financial risks may be particularly relevant, as transfers can take place anonymously and without relying on regulated intermediaries.
The focus is also on securities regulation – particularly on the obligation to provide investors with transparent and reliable information, not least because tokens acquired in the context of an ICO are likely to be subject to high price volatility.
The Guidelines confirm the interest of FINMA in the innovative potential of blockchain – and the necessity of a balanced -but firm- approach in regulating this new phenomenon. FINMA is also part of the Blockchain/ICO Working Group – formed by the (SIF) State Secretariat for International Financial Matters to overlook the legality and operational framework of ICO and blockchain, as reported by Goldblum and Partners earlier this year.