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Initial Coin Offering in Switzerland

Initial Coin Offering in Switzerland

Initial Coin Offerings, shortly known as ICOs are the latest trend on the global stock market, however the most successful ones were issued in Switzerland. The main reason of this success is Switzerland’s reputation as a financial center on one hand, and the creation of the Zug Crypto Valley on the other hand. Zug Crypto Valley is one of the most popular destination for startups issuing ICOs.

Even if at the moment, the Swiss Financial Market Supervisory Authority (FINMA) has not finished yet releasing a legislation which defines the issuance of ICOs, however through the Crypto Valley Association in Zug it has issued a Code of Conduct related to ICOs.

Our Swiss company formation consultants can offer information on initial coin offering regulations in this country.

What is an ICO?

In Switzerlandinitial coin offerings – ICOs – are also known as Token Generating Events – TGEs – and can be defined as fund raising methods through the issuance of virtual money which are meant to become new cryptocurrencies. It should be noted that ICOs have a limited character, meaning they can be issued for a specific amount of time.

The following video offers a short presentation on the Swiss ICOs:

ICOs are more employed by Swiss startup companies seeking to raise money in a fast and legal manner. Our company formation agents in Switzerland can assist foreign investors interested in opening startups here.

FINMA’s guidelines on initial coin offerings in Switzerland

ICOs have started becoming more and more popular all over the world. Because they rely on new technologies and are widely used in the financial sector, Switzerland is a very appealing for launching such ventures. This is why the Financial Supervisory Market Authority (FINMA) has launched a set of regulations with respect to the creation and exploitation of Swiss initial coin offerings.

It should be noted that FINNA only issued guidelines for those who operate or who are involved in virtual currency transactions as follows:

  1. the regulations do not automatically apply to all ICOs, they address only certain providers of digital assets;
  2. as there are certain areas in which ICOs can interfere with the financial markets, these activities will be subject to licensing requirements;
  3. such licenses will be issued based on a case-by-case assessment;
  4. in the respective assessment, FINMA will analyze the function and purpose of the ICO, which can be tradable or transferable.

Even if there is no specific law, Swiss initial coin offerings that interfere with the financial market regulations must comply with the following:

  • – the Banking Law and the Anti-Money Laundering Act;
  • – the Collective Investments Scheme Act;
  • – the Securities Trader and Stock Exchange Law;
  • – the Blockchain Act that was launched in 2020.

If you are interested in launching an ICO in Switzerland, you can rely on our local specialists who can advise you. One of the most suitable ways of setting up such a venture is through a Swiss foundation as it requires no shareholders compared to a company, thus it offers a higher degree of independence.

Types of initial coin offerings acknowledged in Switzerland

Based on whether they are tradable or transferable, tokens can take one of the following forms:

  • – payment tokens;
  • – asset tokens;
  • – utility tokens.

Payment tokens are similar to cryptocurrencies and are considered tradable assets that can be accepted as a means of paying for goods and services. Asset tokens, on the other hand, as often considered participations in companies (similar to shares), or entitlements with dividend and interests attached to them. Such tokens are usually treated as bonds, equities, or derivatives, thus falling under FINMA’s licensing rules. Utility tokens are regarded as means that enable access to applications or services.

One of the most important Swiss ICOs must comply with is the Anti-Money Laundering Law, as it follows:

  • – payment ICOs may be required to comply with its regulations if it can be used as a means of payment that can be transferred;
  • – utility ICOS will not be subject to anti-money laundering regulation if they do not qualify as securities, and their only purpose is to offer access to applications or services.

Asset ICOs, however, can be treated as securities that can be traded, therefore will also need to comply with Civil Code in Switzerland and will require a prospectus before being launched.

If you need more information on the best way to create an ICO in Switzerland, feel free to address our company registration advisors.

How to set up an ICO/TGE in Switzerland

The first step for the issuance of an ICO in Switzerland is to register a company or a foundation with the local authorities. Following that, an assessment of the virtual coin being listed on the Stock Exchange is required, as certain provisions related to collective investment schemes may apply.

A particularity of Swiss ICOs is that the issuance of virtual tokens will bring monetary rewards of the investors, unlike traditional offerings which imply other types of securities. Because of this, filing a prospectus with FINMA could be required, however it must be kept in mind that each case is treated singularly.

Why set up an initial coin offering in Switzerland?

Switzerland is a very attractive country for foreign investors because of the overall economic and political stability it offers. It is also an appealing destination for professional investors because of the regulations it offers upon the establishment of investment funds, regulations which apply when creating ICOs in Switzerland.

An important aspect which is should be considered when choosing to create an ICO in Switzerland is that this country is among the first in the world to have a dedicated canton to the creation of cryptocurrencies: Zug Crypto Valley. Zug is one of the cantons with the lowest tax rates in Switzerland, therefore it will ensure a profitable environment for ICOs from a taxation point of view.

Switzerland’s position on cryptocurrencies

If in 2016, Zug Crypto Valley was the first region in the country to introduce Bitcoin as a way of paying city fees. Now, Switzerland is one of the most advanced countries in the world in terms of cryptocurrencies and blockchain technology:

  • – in 2020, after the Blockchain Law was enabled, 2 companies were licensed by FINMA;
  • – at the level 2021, the country already hosted more than 900 companies in these fields;
  • – both companies and persons are allowed to make payments in cryptocurrencies with the limit per transaction settled at USD 100,000.

For more reasons or assistance in setting up an initial coin offering in Switzerland, please contact our company registration experts.