The new industry standard, cryptocurrency as a legalized system, earns the user’s trust. There’s a significant chance that cryptocurrency will make its way to traditional financial sectors in the coming years. European Union is eager to evolve cryptocurrency by introducing crypto assets and technologies to traditional sectors. The challenge in this regard is the regulatory-financial services as cryptocurrency can’t pave its way to the traditional market without regulatory approval. Moreover, every business requires a specific license.
The world’s acceptance of cryptocurrency, you should know how to flourish in various cryptocurrencies. Countries like Switzerland provide tremendous opportunities for crypto projects. Switzerland recognizes blockchain technology as an opportunity for taking the lead in the global world. You can avail of this opportunity by the Swiss regulatory system if you know in depth how to launch your crypto product. This guide will help you out in setting up a crypto business.
Types Of Authorization And Crypto Regulators
Before starting a crypto business, it is wise to know how it is regulated and authorized. The Swiss Financial – Market Supervisory Authority or FINMA regulates Crypto projects in Switzerland. FINMA strictly believes the potential that blockchain technology offers to the financial sector is spectacular. Licensing, recognition, authorization, approval, and registration are the five types of listed authorizations for the financial sector. Among these, Fintech use only two authorizations named recognition and authorization. Virtual currency is treated as a classified asset in Switzerland.
Suppose we go into a bit of details of the authorizations. In that case, these include activities permitted, anti-money laundering procedures, money transmission, capital requirements and transactions, ownership and regulatory requirements, jurisdictions to attract uses, and documents required for user identification.
While choosing a certain business, make sure to select and apply for the optimal authorization to enhance business value and opportunities. Ensure to remain updated with the responsibilities that come along with it that will sustain for many years. No doubt, it seems difficult and overwhelming at the start of your journey but bears it instead of looking for lawyers to handle these tasks. You will come to know numerous strategies by doing it yourself, which will help you develop close relations with the specialists. All this will ultimately help you create the most effective legal model and forge the finest strategy for developing your business without spending extra money on lawyers.
If you think you have sufficient knowledge about virtual currencies, you can opt for Fintech business. That means you can provide crypto service in the FINMA sandbox. The project’s infrastructure plays an important role. Your project must be good enough for starters to accept the client’s money, can entirely develop and maintain a product, sell financial services, and issue bank cards. Your project should be stable enough to carry out other activities to fulfill all these conditions, even way before authorization.
The innovative Fintech system can contribute remarkably to the financial center of Switzerland by boosting its competitiveness. The urge to finding a future-oriented approach led the financial council to layout three steps to carry a Fintech business.
- 60-Day Deadline
The first step is setting up a 60-day deadline. This Deadline is for holding the money of clients in the settlement accounts. Particularly, for providers of crowdfunding services, the crowdfunding project is facilitated. This procedure is not only restricted o Fintech companies; it’s applicable generally.
The startup into the Fintech, some requirements have to be considered, take it as qualification criteria.
- The total amount of public funds received cannot exceed the total value of 1 million.
- Interest is not charged on accepted funds, nor can they be invested.
- Depositors must be informed of the fact beforehand that these activities are not authorized and supervised by FINMA. That means that the safety of the provided funds is not guaranteed. Note that this rule applies to all activities except banking facilities where FINMAmonitors all the activities strictly.
If a startup meets the above requirements, it can work without the regulator’s authorization. In case the company outgrows the restrictions, the authorization by FINMA will become the cornerstone for any further development of Fintech.
- Self-regulatory organizations
Mostly new firms don’t acquire millions of Swiss francs required for obtaining a Fintech license granted by FINMA. To overcome this situation, joining one of the eleven self-regulatory organizations operating in Switzerland can be your best option. By doing this, you can receive the status of financial intermediaries.
Providing financial intermediaries services depends on the regulator’s approval for each service, just like banks do. Only those services related to product structure can be practiced and delivered, which are approved by authorization. If you want some product structure changes, you can’t do so without SROs or FINMA’s approval.
There are over ten activities that can be conducted by the SRO members. Asset management, money transfer, foreign exchange transactions, cryptocurrency operations, and other new payment and insurance methods. The firms are allowed to provide services to both individuals and enterprises, no matter the client resides in Switzerland or abroad.
If you decide to join SRO, keep in mind that you have to pay a large sum of money charged as legal support cost. A fee will be paid to your lawyers who will perform their duties efficiently, describing your optimal product models and reviewing dozens of forms and applications. These things are necessary to prove to SRO that you are trustworthy and capable of providing crypto service.
This whole process takes up 3-4 months after sending the application to become a member of SRO. If you want to speed up the processing option, you can do so by paying 1500 Swiss francs.
Availability of Exemptions
Certain exceptions are linked with the different models of Fintech products.
Exemption 1: For the company to be considered banking, some requirements must be met that apply to the sandbox participants.
Exemption 2: For non-deposits and assets that arise in neo banks and payment systems, a saving license is not required if and only if the said conditions are met:
- Card to card transaction is prohibited.
- The maximum balance per client cannot be more than 3000 Swiss francs.
- Funds are interest-free.
Exemption 3: Settlement accounts participating in SROs as non-banking companies are not considered deposits if:
- For executing the client’s transactions, companies should hold some deposit.
- Account credit must be interest-free.
- The transaction duration is restricted.
Fintech can take advantage of these exceptions by getting self-regulatory organizations’ membership and participating in legal exemptions. Still, there are some other points related to crypto services.
As you know, cryptocurrencies have a wide application in digital markets and are about to make their special place in the traditional financial sector. Some additional points are laid out for crypto services all around the world, including Switzerland.
Before registering your crypto service with FINMA, it is advised to study the regulations and legal framework of blockchains in Switzerland. Also, know that crypto services can accept fiat currency without using a bank license. For crypto startups, all these points should be taken under consideration at the product development stage.