Finma published its 2019 report, highlighting the growth and increasing maturity of the digital securities sector in Switzerland. As the government tries to attract more blockchain and crypto businesses, the agency plays a key role in these efforts.
The Swiss financial markets regulator Finma published its annual report for 2019, highlighting key trends around digital assets, STOs, and blockchain developments. The Swiss watchdog pointed out that blockchain continues to “preoccupy Finma intensively.”
In particular, questions around security tokens and security token offerings are filling up Finma’s agenda. “Challenging questions are arising here on all issues concerning the trade, custody, and settlement of different token types on various transaction systems,” so the authority.
Finma supports the government’s efforts in creating legal certainty
As the Swiss Fintech scene is snowballing and the Swiss Federal Council wants to develop the legal framework for blockchain technology, Finma is asked to take an active role in these regulatory projects. Although the Swiss government is not planning to introduce regulation similar to Liechtenstein’s Blockchain Act, it announced to amend several federal laws to facilitate the build-up for blockchain infrastructure and applications.
Finma agrees in its report that Switzerland’s regulatory framework needs changes and stresses the importance of technological neutrality and legal certainty for businesses and investors. The experience from Liechtenstein shows that a progressive legal framework attracts more businesses. Since the Blockchain Act was announced and officially introduced, many companies have decided to move to Liechtenstein to benefit from legal certainty.
Fewer legal enforcement cases against ICOs
The report states 1,185 ICO investigations for 2019, a slight increase compared to 1,086 in 2018. Only 30 of these investigations resulted in legal enforcement actions, compared to 42 in 2018, indicating companies get more careful with their ICO procedures – or developed a better understanding of the rules.
The watchdog recorded a breach of anti-money-laundering regulations at more than ten ICOs, resulting in legal charges. Ultimately, three companies faced enforcement proceedings. Not a lot, considering that there were about 120 Swiss-based ICOs in 2019.
More secondary market services and stablecoins
Another take-away from Finma’s 2019 report is that more service providers focus on secondary market financial services regarding digital assets. In particular, trading and custody services are on the rise.
According to Finma, the market for stablecoins is thriving as well. The latest company to launch a stablecoin was Swiss-based crypto bank Sygnum, which launched a stablecoin pegged to the Swiss franc. Switzerland is also home to Facebook’s stablecoin project Libra, which regulators try to control without putting up unnecessary roadblocks.
New Fintech license gets international attention
Finma also recorded increasing international activity. Since the regulator has launched a new Fintech license, it has recorded growing interest not only from within Switzerland but also from international applicants. The new license enables companies to benefit from relaxed regulatory requirements without having to hold a full banking license.
Altogether, the report paints a promising picture for Switzerland as a go-to location for blockchain and crypto businesses. The main take-away from Finma’s annual report, however, is the agency’s understanding of the importance of technology and its willingness to support innovation-friendly regulations. Putting this mindset into practice will remain an ongoing challenge for the years to come.
You can download the full report here.