Famous for its favorable business climate that has attracted hundreds of crypto companies, Switzerland is now expanding its financial regulatory framework. Some of the upcoming rules will increase oversight in the blockchain industry in compliance with new international standards regarding operations with digital assets.
Also read: With New Regulations, Europe’s Crypto Companies May Be Running Out of Options
Finma Updates Regulatory Framework
As part of the regulatory update, the Swiss Financial Market Supervisory Authority (Finma) has proposed changing the client identification threshold values established in its Anti-Money Laundering Ordinance. Finma wants to lower the limit for cryptocurrency exchange transactions that requires user verification from the current 5,000 Swiss francs to only 1,000 francs (a little over $1,000). The regulatory body says it’s “acknowledging the heightened money-laundering risks in this area,” but the measure may not be to the liking of many crypto businesses operating in the country and their privacy sensitive customers.
The amendments come as a result of Switzerland’s new Financial Services Act and Financial Institutions Act. Both bills were passed by the Swiss parliament in June 2018. During a meeting in November 2019, the Federal Council, which holds the executive power, decided that they would enter into force on Jan. 1, 2020 along with ordinances regarding financial services, financial institutions and supervisory organizations.
The two laws oblige Finma to adopt various implementing provisions that will be “mainly technical in nature,” the regulator announced Friday. Finma has already created a new Financial Institutions Ordinance that “regulates the details of professional indemnity insurance for portfolio managers, trustees and managers of collective assets, details on calculating the de minimis threshold for gaining authorization as a portfolio manager, and on risk management and internal control system for managers of collective assets.”
According to the press release, the financial watchdog has prepared amendments to other ordinances and circulars as well. The authority will also abolish three circulars that will become redundant following the adoption of the new regulations. The changes will be put up for public consultation within the next couple of months, Finma notes in the announcement.
Switzerland Complies With International AML Standards
Like many other nations , Switzerland is taking steps to implement the new global standards for crypto assets that were adopted by the Financial Action Task Force (FATF) last year. According to the recommendations of the intergovernmental organization, companies dealing with cryptocurrencies such as exchanges, wallet providers and payment processors should verify clients who transfer more than $1,000 or €1,000 worth of crypto. Virtual asset service providers should also keep and share user data.
FATF Plenary in session
Stricter due diligence requirements in Europe were also introduced with the EU’s Fifth Anti-Money Laundering Directive (AMLD5) which member-states were expected to transpose into national law by Jan. 10, 2020. The stringent regulations have already forced a number of businesses from the sector to either close down or relocate to other, friendlier jurisdictions rather than radically change their business models and risk losing customers.
Up until now Switzerland has been a magnet for crypto companies thanks to its positive attitude towards the industry and favorable regulations. Its traditional financial institutions have gradually started to cooperate with blockchain startups. The Crypto Valley, centered on the canton of Zug, is now home to over 800 of these businesses that created 1,000 new jobs in 2019 alone, as a recently released survey revealed . Only time will tell if the Swiss government will manage to keep them in the country.
What’s your opinion about the upcoming Swiss regulations concerning the crypto space? Share your thoughts on these developments in the comments section below.
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Images courtesy of Shutterstock, Finma, FATF.
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