Switzerland: Watchdog launches investigation into initial coin offerings, issues guidance
02 Oct 2017

Switzerland’s Financial Market Supervisory Authority (FINMA) has launched an investigation into a number of initial coin offerings (ICOs) as it steps up oversight of the digital coin fundraising practice.

The regulator announced the development as it also issued guidance on ICOs, stating its policy to initiate enforcement proceedings whenever it is notified about ICO procedures that breach regulatory law or which seek to circumvent financial market rules.

Although ICOs are currently not governed by specific regulations in the country, there may be already one or more aspects of existing financial market law that would cover ICO campaigns, given some resemblances between ICOSs and traditional conventional financial market transactions.

These include provisions in money laundering and terrorism financing law, such as the Anti-Money Laundering Act, which applies where the creation of a token by an ICO vendor involves issuing a payment instrument, the regulator said.

“If this is the case, other supervisory issues may be effective for third parties, especially for professional cryptobrokers or trading platforms which carry out 3/4 exchange transactions or transfers with tokens (secondary trading with tokens).”

They may also be covered under banking law provisions, “such as accepting public deposits where an obligation towards participants arises for the ICO operator because of the ICO generally necessitates a banking licence.”

News of the investigation comes days after FIMNA announced that it had shut down the unauthorised providers of fake cryptocurrency ‘E-Coin,’ whose developers had accepted some million Swiss francs in public deposits without holding the required banking licence.

FINMA liquidated the companies involved, seized the block assets of approximately two million Swiss francs and also issued a warning about ‘unscrupulous’ cryptocurrency providers.

-By Irene Madongo

Advance your CPD minutes for reading this article, by signing up and using the CPD Wallet

FREE CPD Wallet