Switzerland's FINMA Eyes Crypto Valley

Swiss Financial Market Supervisory Authority, FINMA, is invited by the Crypto Valley Association to regulate the country’s booming cryptocurrency industry.

Crypto Valley

Of twenty-six Swiss cantons, or member states making up Switzerland’s confederation, Zug earned worldwide notoriety for its embracing of cryptocurrencies such as bitcoin.

Indeed, with a population the size of a poorly attended American baseball game, Zug punches far above its relative weight in terms of technological enthusiasm. By summer of last year, the city itself even accepted bitcoin for some payments.

Cryptocurrencies are so part of the culture of Zug, it has come to be known colloquially as Crypto Valley, a play on tech movers and shakers in Silicon Valley, for example.

And Crypto Valley’s status has been seemingly sealed with Initial Coin Offerings (ICOs) booming in value tenfold in about as many months this year, closing-in on 200 billion USD by year’s end.

The growing regulatory chestnuts, excuses or pretexts to intervene, revolve around two themes popping up from world governments: money laundering and terrorism.

Switzerland alone brought to market over sixty percent of the largest ICOs, including Tezos’ breathtaking gathering of ether and bitcoin valued at nearly 250 million USD.

The country just finished hosting its very first ICO Summit, billed as “dedicated to crowdfunding in the blockchain industry.”

Success Breeds Attention and Dissonance

With success and enthusiasm comes attention, and with attention state regulators are usually not far behind.

Enter Swiss decade-old regulator, Financial Market Supervisory Authority (FINMA).

In a statement released on September 29th, FINMA announced its newly crafted FINMA Guidance 04/2017.

After acknowledging “the innovative potential of such technology” and how FINMA “has been supporting efforts in developing and implementing blockchain solutions in the Swiss finance industry for several years,” the online missive concludes perhaps new regulation might not be necessary.

FINMA seems to understand how “ICOs are structured from technical, functional and business standpoints varies markedly from offering to offering,” which is no small statement.

Dissonance creeps in because, up to this point, “ICOs are currently not governed by specific regulations, either globally or in Switzerland,” the release notes, leading readers to possibly question just why, now, regulators are needed or wanted, considering the massive amounts of wealth creation thus far.

Pretexts to Intervention?

The growing regulatory chestnuts, excuses or pretexts to intervene, revolve around two themes popping up from world governments: money laundering and terrorism.

The two subjects are virtual conversation ending, and can be used as magic escape hatches to avoid justifying state intervention in any meaningful or substantial way. China is a great example of this brute-force mentality.

FINMA stops short of new guidelines just yet, warning how “Swiss legislation on financial markets is principle-based; one such principle is technology neutrality. Collecting funds for one’s own account without a platform or issuing house is unregulated from a supervisory perspective in cases where repayment is not obliged, payment instruments have not been issued and no secondary market exists.”

Depending upon “how an ICO is structured, however, some parts of the procedure may already be covered by existing regulations.”

Nevertheless, the Crypto Valley Association (CVA) in its own press release on September 7th, urged and welcomed “clear, comprehensive yet flexible [state] regulation that clarifies the legal status of token launches, tokens and the investments made therein. We also believe the industry would benefit from a clear code of conduct surrounding token launches, to help companies fulfil their legal and moral obligations and give investors a clear understanding of the risks involved.”

Crypto Valley Association is a government-supported organization and includes members such as Ethereum and Thomson Reuters (TR) among its advisers.

Reuters, the news division of TR, quoted CVA President Oliver Bussmann approvingly:

“Bottom line, we welcome that the Swiss regulator is taking action and recognizes the need for clear guidance and oversight, especially with regards to KYC (know-your-client) compliance, while also fostering innovation.”

What do you think? Is such regulation, even assumed under existing law, once applied, going to hamper ICOs and future innovation? Are KYC regulations a fundamental violation of cryptocurrencies’ value?

Images courtesy of USB, FINMA, Wikimedia

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