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On December 14, 2018, the Swiss Federal Council, the Swiss government, published a comprehensive report titled the Legal Framework for Distributed Ledger Technology and Blockchain in Switzerland. It addresses the legal treatment of cryptocurrencies, blockchain, distributed ledger technologies, and fintech under the current legal framework and highlights areas that require amendments in order to provide market participants with legal certainty. It focuses on civil law, insolvency law, financial market law, banking law, and combatting money laundering and terrorist financing. The report acknowledges that there is a selective need for new regulation to cover open questions, for example the treatment of cryptocurrencies. The Federal Council has tasked the Federal Department of Finance and the Federal Department of Justice and Police to draw up a consultation draft in the first quarter of 2019 to address these open questions.

I. Approach to Assets Created Through Blockchain

On December 14, 2018, the Swiss Federal Council, the Swiss government, published a comprehensive report titled the Legal Framework for Distributed Ledger Technology and Blockchain in Switzerland.[1] The report is based on the work of the blockchain/ICO working group that was set up by the Swiss State Secretariat for International Finance (Staatssekretariat für internationale Finanzfragen, SIF) in January 2018.[2] The report also took into account the evaluation of a consultation carried out with the fintech and financial industry as well as the recommendations of the Blockchain Taskforce, a private industry initiative.[3]

The Federal Council report addresses the legal treatment of cryptocurrencies, blockchain, distributed ledger technologies (DLT), and fintech under the current legal framework and highlights areas that require amendments in order to provide market participants with legal certainty. It focuses on civil law, insolvency law, financial market law, banking law, and combatting money laundering and terrorist financing.[4] The report acknowledges that there is a selective need for new regulation to cover open questions, for example the treatment of cryptocurrencies.[5] The Federal Council has tasked the Federal Department of Finance (FDF) and the Federal Department of Justice and Police (FDJP) to draw up a consultation draft in the first quarter of 2019 to address these open questions.[6]

Laws that can potentially apply to cryptoassets are anti-money laundering legislation, tax laws, financial market laws, civil law, bankruptcy law, and banking law.

A. Anti-Money Laundering Law

The Anti-Money Laundering Act (AMLA) generally applies to “financial intermediaries,” who are defined as natural and legal persons who accept or hold deposit assets for third parties or who assist in the investment or transfer of such assets on a professional basis.[7] The Federal Council reiterates that cryptocurrencies are classified as virtual currencies, which are considered assets with regard to their tradability.[8] AMLA is technology-neutral and therefore also applicable to cryptoassets.[9] However, the Federal Council proposes to take the following steps to make the application of anti-money laundering legislation more explicit:

  • It will set out in further detail and explicitly adopt into law the current FINMA [Financial Market Supervisory Authority] practice whereby decentralised trading platforms with the power to dispose of third-party assets are subject to AMLA;
  • It will set out in further detail and explicitly adopt into law the applicability of Article 2 paragraph 3 letter b AMLA to the issue of crypto-based means of payment;
  • Switzerland will in future continue its efforts in international committees to actively promote an internationally coordinated and effective defence mechanism to combat the risks of money laundering and terrorist financing by means of international standards.[10]

B. Taxation

Cryptocurrencies may also be subject to wealth, income, and capital gains tax, as outlined in the Law Library’s June 2018 report entitled Regulation of Cryptocurrency in Selected Jurisdictions.[11]

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II. Custodianship of Cryptocurrencies by Financial Institutions

Custody services for cryptocurrencies in Switzerland are provided both by specialized companies offering custody services as a core activity (crypto custodians) and by other blockchain service providers as an ancillary service, for example crypto trading platforms and brokers.[12] If the tokens are functionally comparable to money, these services may be offered without bank authorization, provided that a Swiss bank provides a guarantee in case of default.[13]

Furthermore, custody services might be subject to the Financial Services Act (FinSA).[14] If the service is restricted exclusively to custody, FinSA will not apply.[15] However, if the sale of tokens that are classified as financial instruments is only possible via an account with the provider of custody services, FinSA will apply. Such providers must comply with the conduct rules in articles 7-20 of FinSA.[16]

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III. Regulation of Cryptocurrencies as Financial Securities

There are currently no regulations specific to initial coin offerings (ICOs), but depending on how the ICO is designed, financial market laws may be applicable. This is assessed on a case-by-case basis by the Swiss Financial Market Supervisory Authority (Eidgenössische Finanzmarktaufsicht, FINMA).[17] FINMA differentiates between payment tokens (cryptocurrencies), utility tokens, and asset tokens. Payment tokens (cryptocurrencies) are defined as tokens that are used as a means of payment or as a means of money or value transfer. Utility tokens are those that provide digital access to an application or service by means of a blockchain-based infrastructure. Asset tokens represent assets such as a debt or an equity claim against the issuer. According to FINMA, asset tokens are analogous to equities, bonds, and derivatives.[18]

Operators of financial market infrastructures are subject to authorization by FINMA.[19] If the tokens received in an ICO qualify as securities, trading will require authorization. “Securities” are defined as “standardised certificated or uncertificated securities, derivatives and intermediated securities which are suitable for mass standardised trading,”[20] meaning they are “publicly offered for sale in the same structure and denomination or are placed with more than 20 clients, insofar as they have not been created especially for individual counterparties.”[21] FINMA treats utility tokens that have an additional investment purpose or a sole investment purpose at the time of issue, as well as asset tokens that are standardized and suitable for mass standardized trading as securities.[22]

The Federal Council in its report endorses FINMA’s classification of tokens issued in ICOs as asset, utility, or payment tokens.[23] It also points out that the existing definitions for securities and derivatives will not be changed for blockchain- and token-based applications.[24]

However, for financial market infrastructures, the Federal Council proposes an amendment to the Financial Market Infrastructure Act (FMIA) and the Financial Market Infrastructure Ordinance (FMIO), so that exceptions for blockchain and DLT may be granted in justified cases.[25] With regard to crypto-trading platforms, the report states that only decentralized trading platforms for tokens that qualify as securities require authorization from FINMA as a financial market infrastructure, whereas exchange platforms and distributed peer-to-peer platforms do not.[26] However, the operation of a financial market infrastructure is currently limited to certain financial market institutions.[27] The Federal Council therefore proposes the creation of a new authorization category for the operation of a financial market infrastructure involving crypto-based assets by amending FMIA and FMIO.[28]

Furthermore, the Federal Council proposes with respect to crypto funds to amend the Swiss Collective Investment Schemes Act (CISA)[29] to permit a new fund category called “limited qualified investment funds” (L-QIF). The L-QIFs will require no authorization from FINMA, which means that they can be placed on the market faster.[30] In September 2018, the FDF was instructed to draw up a consultation paper in that regard.[31]

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IV. Treatment of Crytpoassets Not Considered Securities

A. Civil Law

The Federal Council’s report reiterates that tokens in the form of cryptocurrencies are classified as intangible assets under Swiss civil law.[32] Civil law differentiates between tokens that represent a value such as cryptocurrencies and tokens that represent a right outside of the blockchain.[33] The report concludes that as they are neither absolute nor relative rights, the law does not provide any specific requirements for their transfer and there is therefore no need to amend the civil law provisions.[34] However, the Federal Council has tasked the FDF and the FDJP to include a proposal for the transfer of rights by means of digital registers in their consultation draft to improve legal certainty.[35]

B. Insolvency and Bankruptcy Law

As cryptocurrencies are considered assets, they could potentially be seized in insolvency proceedings by the creditor of the person entitled to them, and subsequently be realized. Likewise, in bankruptcy proceedings, when assets are collected, realized, and distributed to the creditors, a realization of cryptoassets is generally possible.[36] Most of the time, cryptoassets are held by third-party wallet providers. If the wallet provider declares bankruptcy, it must be determined whether cryptoassets are included in the estate or whether they can be segregated. The report points out that there are currently no special provisions for the treatment of cryptocurrencies in bankruptcy proceedings, so that the general provisions of the Federal Act on Debt Enforcement and Bankruptcy Act (DEBA) apply.[37] The Swiss Federal Supreme Court has held that segregation is only necessary when the bankruptcy estate has custody over the assets, meaning “exclusive actual power of disposal.”[38] In addition, article 242, para. 3 of DEBA provides that that there is no actual power of disposal in cases of shared custody. The report differentiates between the following cases for cryptoassets:

  • Third-party custody: Custodian has exclusive actual power of disposal over the crypto assets.
  • No third-party custody: The private key to access the crypto assets is exclusively known to the client or known both to the client and the custodian, so that the client retains actual power of disposal.
  • Multi-signature address: Access to the crypto assets requires several keys, so that the power of disposal is shared between the custodian and the client.[39]

The report concludes that cryptoassets are only included in the bankruptcy estate and must be separated if the client has no access to the private key and therefore no custody.[40] However, it is unclear whether they can be separated on the basis of article 242 DEBA as they are not physical “objects” as the text of article 242 explicitly provides. In order to achieve legal certainty, the Federal Council therefore suggests amending the relevant legal provisions to be able to segregate cryptoassets.[41] For that purpose, it is important how cryptoassets are allocated by the third-party wallet provider to determine if they are more akin to a property law claim or a contractual claim due to “mixing.” If the client’s credit balance is assigned to a specific blockchain and registered directly on the blockchain, there will be no problem in assigning the crypto assets to an individual client. The report compares this to a deposit in a safe deposit box or securities account with a bank.[42] If, on the other hand, the credit balances are no longer assigned to an individual blockchain, the clients only have a credit balance vis-à-vis the custodian. The individual balances are only recorded on the custodian’s ledger. The report compares this situation to a traditional bank that does not keep the money that it receives from its clients separate.[43]

In addition to clarifying how cryptoassets may be separated in bankruptcy proceedings, the report also proposes to determine whether the object of separation will be the cryptoasset itself or the access key. However, the report states that this question might be left unanswered if “an additional legal provision were introduced to provide for the segregation of data to which the beneficiary is able to demonstrate a special entitlement.”[44] A parliamentary initiative to amend article 242 of DEBA to include the surrender of non-physical assets was endorsed by the Legal Affairs Committee of the Swiss National Council on May 3, 2018.[45] The Federal Council would extend this claim to include all data and not just assets. In conclusion, the Federal Council will “propose a provision setting out a right to the surrender of data in the event of insolvency, including a claim to the transfer of crypto assets.”[46]

C. Banking Law

In addition to exempting fintech firms that accept public funds up to a total value of CHF1 million (approximately US$995,000) from the requirement to have a banking license (regulatory sandbox), since January 2019, a new fintech authorization category with simplified requirements has been included in the Banking Act.[47] However, even though the new category is commonly referred to as “fintech license,” it is also available to non-fintech companies that meet the authorization requirements.[48]

Companies that are granted the new fintech license may accept public funds of up to CHF 100 million (about US$95.5 million) on a professional basis, but may not invest or pay interest on these funds.[49] This includes traditional currencies as well as cryptocurrencies.[50] Companies with that special license are subject to less restrictive requirements than banks—for example, they are not obligated to participate in the deposit protection regime, but must inform their clients accordingly.[51] Furthermore, unlike banks that have minimum capital requirements of CHF 10 million (about US$9.9 million), companies with the new fintech license must only hold 3% of the public funds received as capital, however, or at least CHF300,000 (about US$ 298,500).[52] The report points out that if cryptocurrencies are held in custody for clients on the blockchain and can be attributed to individual clients at all times, they are not considered deposits within the meaning of the Banking Act and no banking or fintech license is required.[53]

Furthermore, in light of the proposed amendment to the general insolvency law provisions, the Federal Council will look into a corresponding amendment of bank insolvency law provisions for the treatment of tokens and similar assets.[54]

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V. Distinctions in Treatment of Different Categories of Cryptocurrencies

As discussed above, the treatment of different types of cryptocurrencies depends on their nature.

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Prepared by Jenny Gesley
Foreign Law Specialist
April 2019


[1] Federal Council, Legal Framework for Distributed Ledger Technology and Blockchain in Switzerland – An Overview With a Focus on the Financial Sector (Dec. 14, 2018) (Federal Council Report 2018), https://www.newsd.admin.ch/newsd/message/ attachments/55153.pdf, archived at http://perma.cc/Z4X7-7J82.

[2] Id. at 14; Press Release, Federal Council, Blockchain/ICO Working Group Established (Jan. 18, 2018), https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-69539.html, archived at http://perma.cc/YD27-TR3Q.

[3] Federal Council Report 2018, supra note 1, at 14; Working Group Blockchain/ICO, Consultation on the Work of the Working Group Blockchain/ICO (Aug. 31, 2018), https://www.newsd. admin.ch/newsd/message/attachments/53506.pdf, archived at http://perma.cc/36MV-VUGS; Blockchain Taskforce, Strengthening the Blockchain in Switzerland: The White Paper of the Blockchain Taskforce (Apr. 2018), https://blockchainfederation.ch/wp-content/ uploads/2018/10/Blockchain-Taskforce-White-Paper_English-Version1.pdf, archived at http://perma.cc/3JG2-EXSW.

[4] Federal Council Report 2018, supra note 1, at 14.

[5] Id. at 45.

[6] Press Release, Federal Council, Federal Council Wants to Further Improve Framework Conditions for Blockchain/DLT (Dec. 14, 2018), https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-73398.html, archived at http://perma.cc/57PW-M5V8.

[7] Geldwäschereigesetz [GwG] [Anti-Money Laundering Act] [AMLA], Oct. 10, 1997, Systematische Rechtssammlung [SR] [Systematic Collection of Laws] 955.0, art. 2, para. 1, let. a, art. 2, para. 3, https://www.admin.ch/opc/de/classified-compilation/19970427/201601010000/955.0.pdf, archived at http://perma.cc/E9UX-3EBW, unofficial English translation available at https://www.admin.ch/opc/ en/classified-compilation/19970427/201601010000/955.0.pdf, archived at http://perma.cc/M4M6-UW5U.

[8] Federal Council Report 2018, supra note 1, at 131.

[9] Id. at 140.

[10] Id. at 142.

[11] Switzerland, in Law Library of Congress, Regulation of Cryptocurrency in Selected Jurisdictions 70 (June 2018), https://www.loc.gov/law/help/cryptocurrency/regulation-of-cryptocurrency.pdf, archived at http://perma.cc/8SYU-82AT.

[12] Federal Council Report 2018, supra note 1, at 27.

[13] Id. at 88.

[14] Bundesgesetz über die Finanzdienstleistungen [Finanzdienstleistungsgesetz] [FIDLEG] [Financial Services Act] [FinSA], June 15, 2018, SR 950.1, https://www.admin.ch/opc/de/federal-gazette/2018/3615.pdf, archived at http://perma.cc/YM7A-E839. FinSA will enter into force on 1 January 1, 2020, see Federal Council Report, supra note 1, at 112.

[15] Federal Council Report 2018, supra note 1, at 118.

[16] Id.

[17] FINMA, Guidelines for Enquiries Regarding the Regulatory Framework for Initial Coin Offerings (FINMA ICO Guidelines) 2, no. 3 (Feb. 16, 2018), https://www.finma.ch/en/~/media/finma/dokumente/ dokumentencenter/ myfinma/ 1bewilligung/fintech/wegleitung-ico.pdf?la=en, archived at http://perma.cc/PV9L-5AEK.

[18] Id. at 3, no. 3.1.

[19] Finanzmarktinfrastrukturgesetz [FinfraG] [Financial Market Infrastructure Act] [FMIA], June 19, 2015, SR 958.1, art. 4, https://www.admin.ch/opc/de/classified-compilation/20141779/201708010000/958.1.pdf, archived at http://perma.cc/5F64-2WFF, unofficial English translation available at https://www.admin.ch/ opc/en/classified-compilation/20141779/201708010000/958.1.pdf, archived at http://perma.cc/WT73-EMWN.

[20] Id. art. 2, let. b.

[21] Finanzmarktinfrastrukturverordnung [FinfraV] [Financial Market Infrastructure Ordinance] [FMIO], Nov. 25, 2015, SR 958.11, art. 2, para. 1, https://www.admin.ch/opc/de/classified-compilation/20152105/2017 08010000/958.11.pdf, archived at http://perma.cc/NW3S-JAGZ, unofficial English translation available at https://www.admin.ch/opc/en/classified-compilation/20152105/201708010000/958.11.pdf, archived at http://perma.cc/2423-R4HG.

[22] FINMA ICO Guidelines, supra note 17, at 4, nos. 3.2.1–3.2.3.

[23] Federal Council Report 2018, supra note 1, at 83.

[24] Id. at 96.

[25] Id. at 97.

[26] Id. at 99.

[27] Id. at 101.

[28] Id. at 108.

[29] Kollektivanlagengesetz [KAG] [Collective Investment Schemes Act] [CISA], June 23, 2006, SR 951.31, https://www.admin.ch/opc/de/classified-compilation/ 20052154/201607010000/951.31.pdf, archived at http://perma.cc/9HHP-QTY6, unofficial English translation available at https://www.admin.ch/opc/en/ classified-compilation/20052154/201607010000/951.31.pdf, archived at http://perma.cc/8NAX-442E.

[30] Federal Council Report 2018, supra note 1, at 129.

[31] Id.

[32] Id. at 63.

[33] Id. at 64.

[34] Id.

[35] Press Release, Federal Council Wants to Further Improve Framework Conditions for Blockchain/DLT, supra note 6.

[36] Federal Council Report 2018, supra note 1, at 65.

[37] Id. at 66; Bundesgesetz über Schuldbetreibung und Konkurs [SchKG] [Federal Act on Debt Enforcement and Bankruptcy] [DEBA], SR 281.1, https://www.admin.ch/opc/de/classified-compilation/18890002/20190101 0000/281.1.pdf, archived at http://perma.cc/RX3E-7JPD.

[38] Bundesgericht [BGer] [Federal Supreme Court], June 1, 1984, 110 Entscheidungen des Schweizerischen Bundesgerichts [BGE] [Decisions of the Swiss Federal Supreme Court] III 87, 90, https://www.bger.ch/ext/ eurospider/live/de/php/clir/http/index.php?highlight_docid=atf://110-III-87:de&lang=de&zoom=&type=show_document, archived at http://perma.cc/D4CV-GDW2.

[39] Federal Council Report 2018, supra note 1, at 66.

[40] Id. at 67.

[41] Id. at 68, 69.

[42] Id. at 69.

[43] Id.

[44] Id. at 69.

[45]  Id. at 70; Parliamentary Initiative 17.410. Daten sind das höchste Gut privater Unternehmen. Datenherausgabe beim Konkurs von Providern regeln [Data are the Greatest Good of Private Companies. Regulating the Surrender of Data in the Event of Bankruptcy of Providers], https://www. parlament.ch/de/ratsbetrieb/suche-curia-vista/geschaeft?AffairId=20170410, archived at http://perma.cc/V62J-FZ5Y.

[46] Federal Council Report 2018, supra note 1, at 70.

[47] Id. at 89; Press Release, Federal Council, Federal Council Adopts Implementing Provisions for Fintech Authorization (Nov. 30, 2018), https://www.admin.ch/gov/en/start/documentation/media-releases/media-releases-federal-council.msg-id-73186.html, archived at http://perma.cc/72FW-A3GW; Bankengesetz [BankG] [Banking Act] [BankA], Nov. 8, 1934, SR 952.0, art. 1b, https:// www.admin.ch/opc/de/classified-compilation/19340083/201901010000/952.0.pdf, archived at http://perma.cc/XE8G-XARQ.) The Banking Ordinance was amended accordingly. (Bankenverordnung [BankV] [Banking Ordinance] [BankO], Apr. 30, 2014, SR 952.02, https://www.admin.ch/opc/de/classified-compilation/20131795/201901010000/952.02.pdf, archived at http://perma.cc/BZP5-696P.

[48] Federal Council Report 2018, supra note 1, at 89, n.472.

[49] BankA, art. 1b.

[50] Federal Council Report 2018, supra note 1, at 89.

[51] BankO, art. 7a, para. 1(b).

[52] BankO, art. 15, para. 1 & art. 17a, para. 1.

[53] Federal Council Report 2018, supra note 1, at 89; FINMA, Fact Sheet: Virtual Currencies 2 (Jan. 1, 2019), https://www.finma.ch/en/~/media/finma/dokumente/dokumenten center/myfinma/faktenblaetter/faktenblatt-virtuelle-waehrungen.pdf?la=en, archived at http://perma.cc/M9QR-S9AC.

[54] Federal Council Report 2018, supra note 1, at 90.

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Last Updated: 12/30/2020