Switzerland:

Government Outlook:

The Swiss government has announced that it will continue to work on a regulatory framework
favourable to cryptocurrencies. In 2016, the city of Zug, a well-known global cryptocurrency center,
introduced bitcoin as a way to pay city dues, and in January 2018, Swiss Economy Minister Johann
Schneider-Ammann stated that he sought to make Switzerland a “crypto nation”. Similarly, the Swiss
Secretary of International Finance, Jörg Gasser, stressed the need to promote cryptocurrencies while
respecting existing financial standards.

Based on these goals, in late 2020, the Swiss Ministry of Finance began consultations on new
common cryptocurrency rules that would allow it to take advantage of blockchain technology
without stifling innovation.

According to Swiss law, cryptocurrencies do not have the legal status of a currency or money. The
term „cryptocurrency” or „virtual currency” also does not have a legal definition. The Swiss federal
government had to address the topic of virtual currencies in a special report published on 25 June
2014. According to this document, a virtual currency is a digital representation of a value which can
be traded on the Internet and although it takes on the role of money – it can be used as means of
payment for real goods and services – it is not accepted as legal tender anywhere. Virtual currencies
exist only as a digital code and therefore do not have a physical counterpart for example in the form
of coins or notes. Given their tradability, virtual currencies should be classified as an asset.

Virtual digital assets are categorized into two types: payment tokens and asset tokens. Payment
tokens are defined as cryptocurrencies that are used as a means of payment, while asset tokens are
tokens that represent assets such as real estate, bonds, or company shares.

The Swiss government has established a regulatory framework for payment tokens under the Anti-
Money Laundering Act (AMLA), which requires payment token service providers to register with the
Swiss Financial Market Supervisory Authority (FINMA) and comply with strict AML/CFT (Anti-Money
Laundering/Combating the Financing of Terrorism) regulations. This framework provides legal
certainty and protects consumers from fraudulent activities.

Asset tokens, on the other hand, are regulated under the Swiss Code of Obligations and the Financial
Market Infrastructure Act (FMIA). Asset token issuers are required to comply with the same rules
and regulations that apply to traditional securities, such as prospectus requirements, investor
protection, and disclosure obligations.

The Swiss government has also established a regulatory sandbox for fintech companies, allowing
them to test new products and services in a controlled environment without having to comply with
all the usual regulations. This sandbox provides a supportive environment for innovation and helps
Switzerland to maintain its position as a leading fintech hub.

Crypto Asset Regulations:

Anti-Money Laundering (AML) Regulations: a regulatory framework for payment tokens under the
Anti-Money Laundering Act (AMLA). Payment token service providers are required to register with
the Swiss Financial Market Supervisory Authority (FINMA) and comply with strict AML/CFT
regulations.

Securities Regulations: Asset tokens are regulated under the Swiss Code of Obligations and the
Financial Market Infrastructure Act (FMIA). Asset token issuers are required to comply with the same
rules and regulations that apply to traditional securities, such as prospectus requirements, investor
protection, and disclosure obligations.

Regulatory Sandbox: a regulatory sandbox for fintech companies, allowing them to test new
products and services in a controlled environment without having to comply with all the usual
regulations.

Tax Regulations: The Swiss Federal Tax Administration (FTA) has issued guidelines on how virtual
currencies should be treated for tax purposes. Virtual currencies are subject to income tax and
capital gains tax, and mining activities are subject to VAT.

Data Protection Regulations: The Swiss Data Protection Act (DPA) applies to virtual digital assets, and
service providers must comply with strict data protection regulations.

Blockchain Regulations: The Swiss government has also implemented regulations on blockchain
technology, including the Blockchain Act, which provides legal certainty for blockchain-based
applications and establishes a framework for the transfer of digital assets.

Financial Crime:

The Swiss Financial Market Supervisory Authority (FINMA) is responsible for regulating financial
activities, including those related to virtual assets, in Switzerland. In 2019, FINMA published
guidelines for the treatment of virtual assets under Swiss anti-money laundering (AML) laws. These
guidelines are in line with the Financial Action Task Force (FATF) recommendations and the AMLA.

The Swiss Anti-Money Laundering Act (AMLA) was revised in 2020 to include virtual assets and
service providers that deal with them. The revised AMLA includes a definition of virtual assets and
requires service providers to be registered with FINMA and comply with AML/CFT regulations.

Anti-Money Laundering Act

This federal act applies to financial intermediaries and governs the combating of money laundering
and terrorist financing. It ensures the exercise of due diligence in the conduct of financial
transactions.

With regard to cryptocurrencies, the following is important concerning anti- money laundering
regulations:

• Primary market/ICOs: According to FINMA, issuing cryptocurrencies (e.g., payment tokens and/or
stablecoins) constitutes financial intermediation (issuance of a means of payment). 38

• Secondary market/sales and trading. Merely selling cryptocurrencies to another party, or using
such cryptocurrencies as means of payment for the sale or purchase of goods and services, does not
constitute financial intermediation. The revised Swiss Anti-Money Laundering Ordinance, which
entered into force in connection with the DLT-Law, clarifies that the assistance provided in
connection with the transfer of virtual currencies are services related to payment transactions
subject to the AMLA if such services are provided in the context of a permanent business
relationship

FINMA partially updated the FINMA Anti-Money Laundering Ordinance, which requires financial
intermediaries to combat money laundering and terrorist funding, in late 2022 based on the latest
AMLA and Federal Council amendments. The key change is linked or group transactions that
circumvent anti-money laundering laws. The monthly linked crypto transaction barrier is 1000 CHF
(1010 EUR).

It applies to crypto exchange services where cryptocurrencies are converted into fiat money or such
anonymous means of payment as ATMs. This rule will prevent large transactions from being divided
into smaller transactions as a way to avoid identity checks under AML regulations.

According to FINMA, the mandatory checking of the identity of the beneficial owner and regular
checking that client data is updated don’t need to be set out in detail at the ordinance level.
However, the rule stating that financial intermediaries must regulate the ways of updating and
checking client records in an internal directive will remain.

Moreover, FINMA has also recognised the regulations issued by the Self-Regulatory Organisation of
the Swiss Insurance Association (SRO-SIA). FINMA’s regulations are now adjusted to reflect the
regulatory principles that have been revised and amended for AML/CFT purposes and will be
enforced as a minimum standard. FINMA’s amended ordinance and SRO-SIA’s regulations came into
effect on the 1st of January 2023.

FINMA also continues to regulate trading facilities for Distributed Ledger Technology (DLT) securities
in accordance with Article 73a FMIA (DLT trading facilities) which covers asset tokens. AMLA
regulations continue to exclude utility tokens as long as the main reason for the issuance of utility
tokens is the provision of access rights to a non-financial application of blockchain technology.

Sales and promotions:

According to FINMA,

 Cryptocurrencies does not qualify as securities

 Utility tokens are not treated as securities if their sole purpose is to confer digital access rights to
an application or service, and if the utility tokens can already be used in this manner upon
issuance.
 Asset tokens shall, according to FINMA, generally be treated as securities; for example, if they
represent uncertified securities or derivatives and are standardised as well as suitable for mass
trading.
 Stable coins, according to the FINMA Supplement, may qualify as securities. Stable coins linked
to commodities, which give rise to a contractual claim of the holder in relation to such
commodities

On September 29, 2021, FINMA approved a Swiss fund that invests primarily in crypto-based assets
for the first time. 30 The fund, the "Crypto Market Index Fund", qualifies as an investment fund
according to Swiss law belonging to the category "other funds for alternate investments" with
particular risks.
The Crypto Market Index Fund enables qualified investors to participate in this digital asset class. The
Crypto Market Index Fund established by "Crypto Finance" tracks the performance of the Crypto
Market Index 10, which is administered by the SIX Swiss Exchange

The objective of the Crypto Market Index 10 is to reliably measure the performance of the largest,
liquid crypto-assets and tokens and provide an investable benchmark for this asset class.

Swiss law provides an exemption for sandbox under article 6(2) of the BORO. In accordance with this
exception, without a bank licence, it is permitted to accept deposits from the public (i.e. from more
than 20 persons) of up to CHF 1 million; provided that the deposits do not generate income from
interest and until the deposit is accepted, The investor was informed that the receiving natural or
legal person is not subject to supervision by FINMA and that the investment is not protected by any
deposit protection scheme.

In addition, organizations that accept deposits from the public of up to CHF 100 million, provided
that these deposits are not reinvested or yield interest, may request a “light” banking licence.
Compared to a full banking licence, some exceptions apply to the organization, risk management,
compliance, regulatory auditor qualifications and capitalization requirements. Light Banking license
is available from January 1, 2019. This may be an interesting option for organizations working in the
crypto space that intend to accept deposits from the public for an amount below the limit of 100
million Swiss francs.

Stablecoins

In September 2019, the Swiss Financial Market Supervisory Authority (FINMA) issued guidance on
how it would apply existing laws and regulations to stablecoins, stating that it would evaluate each
project on a case-by-case basis. FINMA classified stablecoins into three categories: payment, asset,
and hybrid stablecoins, and stated that the regulatory requirements for each would vary depending
on its design and purpose.

For payment stablecoins, which are designed to be used as a means of payment, FINMA requires the
issuer to comply with AML/KYC regulations, hold sufficient liquidity reserves, and provide
transparency on the issuance and redemption of stablecoins. Asset-backed stablecoins, which are
backed by a reserve of underlying assets, are subject to additional regulations, including compliance
with securities laws and investor protection regulations.

Hybrid stablecoins, which combine elements of both payment and asset-backed stablecoins, are
subject to a combination of the regulatory requirements for both categories. FINMA has emphasized
that stablecoin issuers must comply with all relevant Swiss laws and regulations, including those
related to money laundering and terrorist financing.

CDBC

In recent years, the Swiss National Bank (SNB) has been actively exploring the potential benefits and
risks of central bank digital currency (CBDC) and has been conducting research on the topic.

The SNB has stated that it sees potential benefits in the issuance of a CBDC, including increased
efficiency, lower costs, and increased financial stability. At the same time, the bank has emphasized
the need for caution in introducing a CBDC, given the potential risks associated with its issuance.
In 2020, the SNB partnered with the Bank for International Settlements (BIS) to explore the potential
for a wholesale CBDC, which would be used for interbank transactions. The project is part of a wider
effort by the BIS to develop CBDCs that can be used for cross-border transactions.