Fintech regulation in Switzerland

The Swiss fintech landscape has evolved significantly over the past few years and Switzerland continues to be an attractive area for innovators in the financial sector.

Switzerland has no specific prohibitions or restrictions in place with respect to fintech. Generally speaking, Swiss financial regulation is technology-neutral and principle-based, which has so far allowed it to cope with technological innovation. That said, fintech operators may be subject to regulation and supervision by the Swiss Financial Market Supervisory Authority (FINMA) or by self-regulatory organizations (SRO) depending on the nature and specifics of their business.

The relevance and application of Swiss laws on anti-money laundering, collective investment schemes, financial market infrastructures, banks, insurance companies and security dealers have to be assessed in the individual case. The legal framework governing the activities of fintech operators consist of a number of federal acts and implementing ordinances as well as circulars and other guidance issued by FINMA. Based on their activities, fintech operators may in particular fall within the scope of the Banking Act (BA), the Anti-Money Laundering Act (AMLA), the Collective Investment Schemes Act, the Financial Market Infrastructure Act, the Stock Exchange Act or the Insurance Supervision Act and some other.

Depending on the specific business model, regulatory requirements may include license or registration requirements as well as ongoing compliance and reporting obligations, in particular relating to the organization, capital adequacy, liquidity and documentation, as well as general fit-and-proper requirements for key individuals, shareholders and the business as such.

When do you need a license?

You will need a banking license if you accept deposits from more than twenty clients; client assets are paid into your accounts; acceptance of client assets features in your advertising.

No banking license needed if you accept client assets, but have a bank guarantee to cover this amount, you accept a maximum of CHF 3000 per person with which clients can explicitly buy products and services; you accept client assets by issuing bonds in line with the statutory requirements set out in an issuing prospectus.

In addition, some trading activities with virtual currencies require a banking license and involve ongoing monitoring by FINMA. This is generally the case when an organization accepts money on a commercial basis from clients and keeps it in its own accounts. The same applies to providers who lodge virtual currency holdings from customers in "wallets" and manage accounts for them. However, no banking license is required if virtual currency holdings are transferred for secure safekeeping only and if each blockchain based deposit can be attributed to an individual customer at all times.

Do you need the authorization to distribute collective investment schemes?

Yes, if you sell (distribute) units in a collective investment scheme, e.g. funds to clients, or you advertise this service as well as if you sell (distribute) units in foreign collective investment schemes to institutional investors and/or to high-net-worth individuals.

But, if you sell (distribute) units in collective investment schemes only to banks, securities dealers, insurances, fund management companies and/or asset managers of collective investment schemes and you sell (distribute) units in Swiss collective investment schemes only to institutional investors and/or to high-net-worth individuals – you do not need an authorization.

In case of securities trading, you need an authorization if you buy and sell shares and other securities for clients and if you buy securities to re-sell in the short-term which generates a turnover of CHF 5 billion or more per year. However, no authorization needed if you buy and sell shares and other securities to manage your own assets.

Do you need the authorization to provide insurance? Yes, if you insure risks and dangers for clients. However, not when you render services voluntarily and without any contractual obligation.

You have to register as insurance intermediary if you broker insurance contracts.
Nevertheless, this is not needed if you represent an authorized insurance company when you broker insurance contracts.In FINMA's Guidance 04/2017, published on 29 September 2017, FINMA set out its position on initial coin offerings (ICOs) and highlighted areas in which ICOs may be covered by existing financial market regulation.

ICO Regulation?

In view of the sharp increase in ICO projects in recent months, FINMA is receiving significant numbers of enquiries from market participants about the applicability of financial market regulation to ICOs and the existence of licensing requirements. ICOs raise a variety of legal issues for which there is no relevant case law and no consistent legal doctrine. Given the wide variety of types of token and ICO set-ups, it is not possible to generalize. Circumstances must be considered holistically in each individual case. FINMA Guidelines from 16. September 2018, nevertheless, classified the tokens issued during the ICO and clarified which regulations may be applicable in case of issuance of each token type.

It should be mentioned, that if FINMA concludes that the tokens of an ICO constitute securities, they fall under securities regulation. Under the Stock Exchange Act (SESTA), book-entry of self-issued uncertificated securities is essentially unregulated. The same applies to the public offering of securities to third parties. The creation and issuance of derivative products as defined by FMIA to the public on the primary market is however regulated (Art. 3 para. 3 Stock Exchange Ordinance, SESTO).

Certain financial market activities require advance authorization. Issuing licenses and granting authorization are therefore key FINMA activities. Applicants who fulfil the licensing requirements receive a license and are then supervised by FINMA to ensure compliance.

FINMA encourages innovation and competitiveness in the Swiss financial marketplace. Clearly, an innovative and competitive Swiss financial marketplace is high on FINMA's list of priorities.


Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.