Switzerland classifies virtual currencies as assets (property). It has relaxed regulatory burdens on and entry barriers for innovative Fintech companies, while keeping risks associated with Initial Coin Offerings (ICOs) and cryptocurrencies related to investor protection, financial crime, and cyber threats in mind. There are currently no ICO-specific regulations, but depending on how the ICO is designed, financial market laws may be applicable. This is assessed on a case-by-case basis. Money laundering and securities regulation are the most relevant laws in this respect. Cryptocurrencies may also be subject to wealth, income, and capital gains tax.
In 2014, the Swiss Federal Council, the Swiss government, published a report on virtual currencies that explained their economic significance, legal treatment, and risks. The term “virtual currencies” is generally used synonymously with “cryptocurrencies.” The report stated that a virtual currency is a “digital representation of a value which can be traded on the Internet” and takes on the role of money, but is not regarded as legal tender and therefore should be classified as an asset (property). It concluded at that point that the economic importance of virtual currencies as a means of payment was marginal and would remain so.
This evaluation has changed since publication of the report. The Federal Council still cautions against risks in the areas of money laundering, terrorist financing, and investor protection, but emphasizes the advantages and potential that new technologies, in particular blockchain technologies, have to offer. In light of this, regulatory barriers for Fintech firms, including providers of mobile payment systems, virtual currencies, and online peer-to-peer lending, were reduced by amending the Banking Regulation. By exempting providers that accept public funds up to a total value of CHF1 million (approximately US$1.05 million) from the requirement to have a banking license, Switzerland aims to create a means for companies to “test innovative business ideas within a limited framework without having to comply with costly and time-consuming regulations” (regulatory sandbox). Firms that take advantage of this exemption must inform their customers in writing that the firm is not subject to supervision by the Swiss Financial Market Supervisory Authority (Eidgenössische Finanzmarktaufsicht, FINMA) and that the deposits are not protected by deposit insurance.
Furthermore, in January 2018, the Swiss State Secretariat for International Finance (Staatssekretariat für internationale Finanzfragen, SIF) reported that it would set up a working group on blockchain and initial coin offerings (ICOs). The working group will work together with the Federal Ministry of Justice and FINMA and involve interested businesses. It will study the legal framework for financial sector-specific use of blockchain technology with a particular focus on ICOs and report back to the Federal Council by the end of 2018. The goal is to become a “blockchain and fintech nation in international terms.”
II. Federal Regulatory Framework
A. Anti-Money Laundering Legislation
The Anti-Money Laundering Act 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. In its 2014 report, the Federal Council concluded that professional trading in virtual currencies and the operation of trading platforms in Switzerland generally come under the scope of the Anti-Money Laundering Act and therefore give rise to a range of due diligence obligations. The due diligence requirements include verifying the identity of the contracting party and establishing the identity of the beneficial owner.
FINMA guidelines clarified that anti-money laundering legislation is applicable to persons who exchange cryptocurrencies for fiat money and vice versa as well as for a different cryptocurrency on a commercial basis (cryptocurrency exchanges), and to custodian wallet providers.
B. Financial Market Law
1. FINMA’s Strategic Goals for 2017 to 2020
In November 2016, FINMA published its strategic goals for the period 2017 to 2020. Among others things, the goals provide that innovative business model in the area of financial services should be supported by removing unnecessary regulatory obstacles and introducing specifically-tailored authorization categories.
2. Regulatory Treatment of ICOs
On February 16, 2018, FINMA published guidelines on the regulatory treatment of ICOs, which complement its earlier FINMA Guidance from September 2017. Currently, there is no ICO-specific regulation, nor is there relevant case law, or consistent legal doctrine. FINMA stated that due to the fact that each ICO is designed in a different way, whether and which financial regulations are applicable must be decided on a case-by-case basis. In an ICO, investors receive blockchain-based coins or tokens in exchange for the funds they transfer. The tokens are created and stored either on a blockchain specifically created for the ICO or on a pre-existing blockchain.
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.
Operators of financial market infrastructures are subject to authorization by FINMA. 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,”  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.” FINMA does not treat payment tokens or utility tokens whose sole purpose is to confer digital access rights as securities. However, 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, are classified as securities.
Funds raised in an ICO generally do not qualify as deposits within the meaning of the Banking Act. However, if there are liabilities with debt capital character—for example, a promise to return capital with a guaranteed return—then such an ICO would require the organizer to obtain a banking license. When assets collected as part of the ICO are managed externally by third parties, the provisions of the Collective Investment Schemes Act apply. Provisions on combating money laundering and terrorist financing (Anti-Money Laundering Act) apply to the ICO of a payment token (cryptocurrency) as soon as the tokens can be technically transferred on a blockchain infrastructure.
3. Fake Cryptocurrencies
In September 2017, FINMA closed down the unauthorized providers of the fake cryptocurrency “E-Coin,” liquidated the companies, and issued a general warning about fake cryptocurrencies to investors. Furthermore, three other companies were put on FINMA’s warning list due to suspicious activity and eleven investigations were conducted into other presumably unauthorized business models relating to such coins.
C. Tax Treatment
1. Wealth Tax
In Switzerland, the individual cantons, the Swiss states, are obligated to levy income tax and wealth tax on the total property (assets and rights with a cash value) of taxpayers that are resident in their canton. Tax rates vary between the individual cantons. Cryptocurrencies are treated like foreign currencies for wealth tax purposes. Holders of bitcoins or other cryptocurrencies are taxed at the rate determined by the tax authorities on December 31st of the fiscal year. As an example, the tax rate for bitcoins determined on December 31, 2017, by the Swiss Federal Tax Administration was CHF13,784.38 (about US$14,500). The Swiss Federal Tax Administration provides tax rates for other cryptocurrencies in addition to bitcoins. These rates are a recommendation to the cantonal tax authorities for wealth tax purposes, but most follow them. The rates are based on the average value of different trading platforms.
2. Income Tax
If an employee receives bitcoins or other cryptocurrencies as a salary or benefit, it forms part of his or her taxable earned income. The Swiss Franc value of the cryptocurrency at the time it was received must be recorded on the salary statement.
If a self-employed person receives bitcoins or other cryptocurrencies for providing goods or services, it must be included as part of the principal or additional income from self-employment at the Swiss Franc value of the cryptocurrency at the time it was received.
Any income that a natural person derives from mining cryptocurrencies by making available computational power for consideration must be included as assessable income for tax purposes. Depending on the specific work arrangement (employee or independent contractor), the compensation received will count as income from salaried work or self-employment.
3. Professional Cryptocurrency Trading
If cryptocurrency trading is done on a professional basis, any profits are taxable and losses are tax deductible. Cryptocurrencies that qualify as business assets are reported on the balance sheet with the book value. Price fluctuations have to be accounted for according to general accounting principles.
4. Capital Gains Tax
Capital gains from movable private assets, which include cryptocurrencies, are generally not subject to taxation and any capital losses are therefore not tax deductible.
III. Cantonal and Municipal Government Agencies
Individual Swiss cantons are also trying to attract Fintech, blockchain, and cryptocurrency firms and start-ups, in particular the Canton of Zug. One association that has been established in Zug is the “Crypto Valley Association,” On its website it describes itself as “an independent, government-supported association established to take full advantage of Switzerland’s strengths to build the world’s leading blockchain and cryptographic technologies ecosystem.” Among other things, it facilitates exchanges between stakeholders and FINMA, for example with a recent roundtable on ICOs.
On November 2, 2017, the Commercial Register Office in the Canton of Zug started accepting bitcoin and ether as payment for administrative costs. Furthermore, the Commercial Register accepts cryptocurrencies as a contribution in kind for purposes of forming a company. In the city of Zug, municipal services (resident registration) of up to CHF200 (about US$210) can be paid with bitcoins.
On January 1, 2018, the municipality of Chiasso, in the Swiss Canton of Ticino, started accepting bitcoins as a tax payment for an amount of up to CHF250 (around US$263).
Prepared by Jenny Gesley
Foreign Law Specialist
 Federal Council, Federal Council Report on Virtual Currencies in Response to the Schwaab (13.3687) and Weibel (13.4070) Postulates (June 25, 2014), https://www.news.admin.ch/NSBSubscriber/ message/attachments/35355.pdf, archived at http://perma.cc/7VAB-FNBJ.
 Id. at 7.
 Id. at 3.
 Press Release, Swiss Federal Department of Finance [FDF], G20 Meeting of Finance Ministers in Argentina: Challenge of Digitization (Mar. 20, 2018), https://www.efd.admin.ch/efd/en/home/dokumentation/nsb-news_list.msg-id-70165.html, archived at http://perma.cc/YJ57-ZHMY.
 FDF, Background Documentation (Nov. 2, 2016), https://www.newsd.admin.ch/newsd/message/attachments/ 45938.pdf, archived at http://perma.cc/RR63-L3RM; Press Release, Federal Council, Federal Council Puts New Fintech Rules Into Force (July 5, 2017), https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-67436.html, archived at http://perma.cc/9A6A-LVE3; Verordnung über die Banken und Sparkassen [Bankenverordnung] [BankV] [Regulation on Banks and Savings Banks] [Banking Regulation], Apr. 30, 2014, Systematische Rechtssammlung [SR] [Systematic Collection of Laws] 952.02, art. 5, para. 3, let. c, art. 6, https://www.admin.ch/opc/de/classified-compilation/20131795/201708010000/952.02.pdf, archived at http://perma.cc/UTN4-MEVM, unofficial English translation available at https://assets.kpmg.com/content/ dam/kpmg/ch/pdf/ordinance-on-banks-and-savings-banks-en.pdf, archived at http://perma.cc/L2ZK-KAX9.
 Banking Regulation art. 6, para. 2; FDF, supra note 5, at 4, no. 5.
 Banking Regulation art. 6, para. 2, let. c.
 Press Release, FDF, 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/9WHU-K2D5.
 Press Release, supra note 4.
 Geldwäschereigesetz [GwG] [Anti-Money Laundering Act] [AMLA], Oct. 10, 1997, SR 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.
 Federal Council, supra note 1, at 14–17.
 AMLA arts. 3, 4.
 FINMA, Guidelines for Enquiries Regarding the Regulatory Framework for Initial Coin Offerings (FINMA ICO Guidelines) (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.
 FINMA, Strategic Goals 2017–2020, goal no. 5 (Nov. 16, 2016), https://www.finma.ch/en/~/media/finma/ dokumente/dokumentencenter/myfinma/finma-publikationen/20161116-finma-strat-ziele-2017-2020_de.pdf?la=en, archived at http://perma.cc/DWV3-BCB8.
 FINMA ICO Guidelines, supra note 13.
 FINMA, FINMA Guidance 04/2017. Regulatory Treatment of Initial Coin Offerings (FINMA Guidance) 7, no. 3.7 (Sept. 29, 2017), https://www.finma.ch/en/~/media/finma/dokumente/dokumentencenter/myfinma/ 4dokumentation/finma-aufsichtsmitteilungen/20170929-finma-aufsichtsmitteilung-04-2017.pdf?la=en& hash=9DCC5C1FF8F61C9AA9412FAD2D7C70533F341EF2, archived at http://perma.cc/6YGB-LSCP.
 FINMA ICO Guidelines, supra note 13, at 2, no. 3.
 Id. at 1, no. 1.
 Id. at 3, no. 3.1.
 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.
 FMIA art. 2, let. b.
 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.
 FINMA ICO Guidelines, supra note 15, at 4, no. 3.2.1–3.2.3.
 Id. at 6, no. 3.4; Bankengesetz [BankG] [Banking Act], Nov. 8, 1934, SR 952.0, arts. 1, 3, https://www.admin.ch/ opc/de/classified-compilation/19340083/201601010000/952.0.pdf, archived at http://perma.cc/R5N5-E4KE.
 FINMA ICO Guidelines, supra note 15, at 6, no. 3.5; 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.
 FINMA ICO Guidelines, supra note 15, at 6, no. 3.6.
 Press Release, FINMA, FINMA Closes Down Coin Providers and Issues Warning About Fake Cryptocurrencies (Sept. 19, 2017), https://www.finma.ch/en/news/2017/09/20170919-mm-coin-anbieter/, archived at http://perma.cc/VN3C-2ZUK.
 Bundesgesetz über die Harmonisierung der direkten Steuern der Kantone und Gemeinden [StHG] [Federal Act on the Harmonization of Direct Taxes Levied by Cantons and Municipalities], Dec. 14, 1990, SR 642.14, art. 2, para. 1, https://www.admin.ch/opc/de/classified-compilation/19900333/201801010000/642.14.pdf, archived at http://perma.cc/5QP8-2NXP.
 See, e.g., Kanton Zug. Finanzdirektion. Steuerverwaltung [Canton Zug. Finance Directorate. Tax Administration], Kryptowährungen (Bitcoin, Ethereum, Tokens usw.): Merkblatt Steuern für Privatpersonen [Cryptocurrencies (Bitcoin, Ethereum, Tokens etc.): Explanatory Leaflet for Private Persons] (Nov. 30, 2017), https://www.zg.ch/ behoerden/finanzdirektion/steuerverwaltung/kryptowaehrungen/download/Kryptowaehrungen - Merkblatt def. - 30.11.2017.pdf/download, archived at http://perma.cc/VGX2-C5HS.
 Course Listing Federal Income Tax 2018, Federal Tax Administration, https://www.ictax.admin.ch/extern/ en.html#/ratelist/2018, archived at http://perma.cc/9JCD-MHSE.
 The other cryptocurrencies are currently Cardano, Bitcoin Cash, Ethereum, IOATA, Litecoin, Tron Coin, NEM, Stellar Lumens, Palladium, Platinum, and Ripple. The list is continuously updated.
 Kanton Zug, supra note 30, at 1, no. 3.
 Id. no. 4.
 Id. nos. 5, 6.
 Id. no. 6.
 Press Release, Kanton Zug [Canton Zug], Handelsregisteramt Zug akzeptiert Kryptowährungen Bitcoin und Ether als Zahlungsmittel [Commercial Register Office Zug Accepts Cryptocurrencies Bitcoin and Ether as Means of Payment] (Nov. 2, 2017), https://www.zg.ch/behoerden/volkswirtschaftsdirektion/handelsregisteramt/aktuell/handelsregisteramt-zug-akzeptiert-kryptowaehrungen-bitcoin-und-ether-als-zahlungsmittel, archived at http://perma.cc/384H-BEUE.
 Press Release, Kanton Zug [Canton Zug], HR Zug lässt Kryptowährungen als Sacheinlage zu [Commercial Register Office in Zug Accepts Crytocurrencies as a Contribution in Kind] (Sept. 4, 2017), https://www.zg.ch/ behoerden/volkswirtschaftsdirektion/handelsregisteramt/aktuell/bitcoin-als-sacheinlage?searchterm=bitcoin, archived at http://perma.cc/H5A7-AUJH.
 Press Release, Stadt Zug [City of Zug], Von Bitcoin zu Blockchain-Anwendungen [From Bitcoin to Blockchain Applications] (Nov. 15, 2016), http://www.stadtzug.ch/de/ueberzug/ueberzugrubrik/aktuelles/aktuelles informationen/welcome.php?action=showinfo&info_id=351680&ls=0&sq=&kategorie_id=&date_from=&date_to, archived at http://perma.cc/LZL9-CNHR.
 Possibilità di pagamento imposte in Bitcoin [Possibility to Pay Taxes in Bitcoin], Comune di Chiasso [Municipality of Chiasso](Feb. 1, 2018), https://www.chiasso.ch/possibilita-pagamento-imposte-bitcoin/, archived at http://perma.cc/2VR9-STWR.
Last Updated: 08/16/2019