Swiss Regulator Releases ICO Legislative Guidance
Despite the lack of stability in the cryptocurrency market, Initial Coin Offerings are continuing their popularity growth. This has encouraged more and more financial institutions to develop regulatory frameworks and guidance that should be expected when joining the ICO market, either as a service provider, or investor.
With this in mind, recent reports indicate that the Swiss Financial Market Supervisory Authority, also known as the FINMA, has published its very own guidance on how financial market legislation should be applied in the ICO niche.
Based on this aspect, FINMA mentioned that it will focus on both the economic function and purpose of ICO tokens when it comes down to assessing them. To do so, the regulatory body has divided tokens into utility tokens, asset tokens and payment tokens.
Payment tokens are those whose purpose is to function as a means of payment – in this case, the FINMA will require that companies comply with anti-money laundering regulations, yet these tokens will not be treated as securities, contrary to what other financial institutions are considering.
Utility tokens, on the other hand, do not quality as securities in case their purpose consists in granting access rights to a service or application. However, in case the utility token is being used as an investment, then they’ll be treated as securities. This means that securities legislation will need to be respected by ICO holders and investors.
Last but not least, asset tokens will be treated as securities, as there are several legislative requirements for trading, alongside the civil laws applicable as part of the Swiss Code of Obligations.
In a press statement, the organization mentioned that: "The application of blockchain technology has innovative potential within and far beyond the financial markets. However, blockchain-based projects conducted analogously to regulated activities cannot simply circumvent the tried and tested regulatory framework (…) Our balanced approach to handling ICO projects and enquiries allows legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system."
It is important to point out the fact that FINMA also believes that there are hybrid tokens, where a token serves several purposes, therefore having to abide by different laws.