Switzerland has released a document outlining new ICO guidelines which it hopes will be become a new standard among developed countries.
The release comes days after Gibraltar announced it would be introducing its own ICO regulations in the coming weeks. Switzerland has swooped out of nowhere and has apparently beaten the British overseas territory to the punch.
The document, released by the Financial Market Supervisory Authority (FINMA), looks to create “clarity for market participants”:
“Creating transparency at this time is important given the dynamic market and the high level of demand.”
The Swiss regulators report seeing a sharp increase in the number of ICOs being planned or executed and, as such, has been receiving a large amount of regulatory inquiries.
Focus on function
FINMA has decided to focus on the economic function and purpose of the tokens being issued as part of the ICOs. The key factors of analysis will be whether the tokens are tradeable and transferable.
The regulator said:
“At present, there is no generally recognised terminology for the classification of tokens either in Switzerland or internationally.”
Under the new guidelines, tokens are organised into three distinct types:
Payment tokens – these are synonymous with cryptocurrencies and don’t have a function beyond being a means of payment.
Utility tokens – these are designed and distributed in order to provide the holder access to an application or service.
Asset tokens – these tokens are a representation of some form of physical asset such as earning streams, or some other form of entitlement such as dividends or interest payments. In terms of their economic function, these tokens are similar to equities or bonds.
The document indicates that money laundering and securities regulations are the most applicable to ICOs. The document says that “money laundering risks are especially high in a decentralised blockchain-based system, in which assets can be transferred anonymously and without any regulated intermediaries.”
The regulator also wants to ensure that the innovative potential of blockchain technology is not dampened by the regulations.
“The application of blockchain technology has innovative potential within and far beyond the financial markets,” FINMA CEO, Mark Branson commented.
“However, blockchain-based projects conducted analogously to regulated activities cannot simply circumvent the tried and tested regulatory framework. Our balanced approach to handling ICO projects and enquiries allows legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system.”