Crypto regulation Switzerland

FINMA sorts tokens into payment tokens, utility tokens and asset tokens, with hybrid tokens as the residual case where a token belongs to more than one. The CMS guide to Swiss crypto regulation sets out the consequences: a cryptocurrency usually qualifies as a payment token, a pure utility token escapes financial market regulation altogether, and an asset token is treated as a security with everything that follows.

Classification turns on the original intention behind the token and not on how someone might later use it. A utility token that people start trading speculatively does not become an asset token because of the trading; equally, a token issued to raise capital is an asset token however it is labeled. For an issuer the useful discipline is that the category is fixed at design time, so the question has to be answered before the token exists.

A token that gives access to a service and also a share of revenue carries both sets of obligations, and the Swiss approach stacks them instead of choosing between them.

The DLT Act and its ordinance came into force on 1 August 2021, and they made three changes. The first created ledger-based securities: rights registered in a qualifying securities ledger, transferred by an entry in that ledger with full legal effect. A Swiss company can therefore issue shares that exist natively on a ledger, with the same legal force as a paper certificate.

The second created the DLT trading facility, an authorization for a venue doing multilateral trading in ledger-based securities, with proportionate requirements for a small facility. This is the piece that distinguishes Switzerland from most jurisdictions: the instrument and the venue for it were legislated together, so a security token has somewhere to trade.

The third addressed segregation in insolvency, clarifying that crypto assets held in custody for a client can be segregated from the custodian's estate. This distinction determines whether client assets remain separately recoverable when a Swiss custodian becomes insolvent.

Switzerland has two routes for a firm taking client assets, and the capital requirement is the clearest difference between them. A banking license requires a minimum capital of 10 million Swiss francs. The fintech license, which Switzerland introduced for firms accepting deposits without lending them out, requires 3 percent of the accepted public deposits and the accepted crypto-based assets held in collective custody, with a floor of 300,000 Swiss francs.

A custody and settlement business with modest balances can be authorized without the capital a deposit-taking bank needs, and it accepts the restriction that it may not run a lending book with the money. A firm that intends to lend, or that wants the standing a banking license carries with institutional counterparties, takes the banking route and the capital requirement with it.

Both routes carry the anti-money-laundering obligations: registration, customer identification, transaction monitoring extended to the counterparty address, and the audit duties under the Swiss AML framework. Those apply regardless of license category, and in practice they are where the operating cost of a Swiss crypto business sits.

FINMA granted banking licenses to Sygnum and to AMINA Bank, then named SEBA, in August 2019, the first banking licenses anywhere built for crypto business. Both are full Swiss banks and both have expanded since.

Sygnum provides business-to-business banking services through a platform other Swiss banks use to offer digital assets to their own clients, plus treasury services for firms holding digital assets on a balance sheet. For a bank that wants to offer crypto without building custody, that is the relevant model.

AMINA Bank, based in Zug, has built regulated hubs in Zug, Abu Dhabi and Hong Kong and an EU subsidiary, and it became the first crypto banking group to receive a MiCA license, through its Austrian subsidiary. The Austrian authorization connects AMINA Bank to fintech in Vienna: a Swiss bank reached the EU market through an Austrian authorization, which is exactly the route the FMA has been encouraging.

Retail offerings include SwissBorg and the Swiss franc stablecoin Frankencoin.

A private investor in Switzerland pays no capital gains tax on a crypto disposal. Failing the criteria for excluding professional trading does not automatically make the gains business income.

The criteria that exclude professional trading when all are met are concrete: hold the position for at least six months, keep annual trading volume below five times the portfolio value at the start of the year, keep capital gains below half of net income, buy without third-party financing, and use derivatives only to hedge an existing position and not to open one. If a trader exceeds the volume threshold, or their gains dominate their income, professional trading must be assessed using all the circumstances; neither fact automatically establishes self-employment.

Wealth tax applies to holdings, which go into the annual return at their value on the reporting date, and the rate is set by canton, usually between 0.05 and 1 percent of assets, with an exemption threshold that also varies by canton. Income is taxable as income regardless of the private investor status, which covers staking and mining rewards. Switzerland therefore taxes wealth and income from crypto, while exempting private capital gains.

Switzerland is not in the EU and not in the EEA, so MiCA does not apply and a Swiss authorization gives no EU passport. A Swiss firm that wants to serve EU clients needs an EU-authorized entity, which is why AMINA set one up in Austria and why other Swiss firms have established subsidiaries in member states. A Swiss license alone does not authorize a firm to serve EU clients.

In the other direction, an EU-authorized provider serving Swiss clients deals with Swiss rules on its own terms, because the MiCA passport stops at the border. For a German firm the question is usually which entity faces which client, and the answer determines which supervisor reads the file. MiCA in Europe sets the EU framework for firms assessing crypto hubs in Europe.

The Point Zero Forum in Zurich is the meeting that brings regulators and the industry into the same room, which is the kind of occasion where a Swiss position gets stated before it is published. Swiss financial technology activity includes fintech in Zurich and the Crypto Valley cluster in Zug.

For German professionals the Swiss market matters because the structures meet: a German asset manager may use a Swiss custodian, a Swiss bank may serve German clients through an EU entity, and the staff on both sides compare notes. The Bitcoin seminar for Switzerland provides training for the Swiss market.

Switzerland applies its existing financial market law according to what a token does: a payment token, a utility token, an asset token or a hybrid, each with its own consequences. Holding and trading crypto as a private person is lawful, and a business that holds client assets or trades for clients needs a FINMA authorization, either a banking license or the fintech license.

A ledger-based security is a right registered in a qualifying securities ledger under the Swiss DLT Act, which is transferred by an entry in that ledger with the same legal effect as a transfer of a certificated security. The ledger-based security was created by the DLT Act in force since 1 August 2021, and it lets a Swiss company issue shares or bonds that exist natively on a ledger. The matching venue authorization, the DLT trading facility, was created by the same act, so the instrument and its market were legislated together.

A private investor pays no capital gains tax, and professional trading is excluded when all these criteria are met: holding for at least six months, annual trading volume under five times the portfolio value at the start of the year, gains below half of net income, no third-party financing, and derivatives used only for hedging. Wealth tax applies to the holdings regardless, at a cantonal rate usually between 0.05 and 1 percent, and income such as staking or mining rewards is taxable as income. Failure to meet these criteria requires an assessment of all the circumstances and does not automatically make gains taxable as self-employed income.

A Swiss license alone does not authorize this service, because Switzerland is outside the EU and the EEA and MiCA gives it no passport. A Swiss bank reaching EU clients does so through an EU-authorized entity: AMINA Bank took that route and became the first crypto banking group with a MiCA license, through its Austrian subsidiary. For a client the practical question is which entity holds the relationship, because that decides which supervisor and which deposit protection apply.

A banking license requires 10 million Swiss francs in minimum capital and allows deposit-taking with lending. The fintech license requires 3 percent of the accepted public deposits and crypto assets held in collective custody, with a floor of 300,000 Swiss francs, and the firm may not lend the money out. A custody and settlement business can therefore be authorized at a fraction of a bank's capital, as long as it stays out of lending.