FINMA's fact sheet on crowdfunding

Crowdfunding is the practice of funding a project by raising money from a large number of sources. If an investment is involved, those who give the funds face the primary risks to which investors are subject. Crowdfunding platform providers and project developers should verify whether they require a licence from FINMA before providing such activities. Similar regulatory scrutiny can be seen in the case of Libra payment licence, where FINMA also initiated a licensing process due to the nature of financial infrastructure involved. The revised Banking Ordinance ease some legal requirements for financial market participants in ways that also benefit crowdfunding.

The term "crowdfunding" refers to the financing of a project by a large number of donors (project financers). A financer who is interested in a project, posted on an online crowdfunding platform can support it financially via such a platform.

It should be mentioned that according to Swiss law, crowdfunding is not exposed to any specific regulatory requirements, which means that all valid laws governing financial markets apply. However, similar to the decision around no blockchain tax, this regulatory stance might evolve as financial technologies mature. However, it is still necessary to clarify on a case-by-case basis whether a license is required.

Crowdfunding platforms that are used to allocate funds to project developers directly are not subject to licensing requirements under financial market legislation. As well, the license is not needed if funds are channeled via a third party (e.g. an escrow agent) who is independent of the project developers, platform operators or project financers.

Nevertheless, project financers' funds that are channeled through the accounts of platform operators have to verify whether they need a license under the Banking Act. In case a crowdfunding platform operator accepts funds on a commercial basis and, rather than forwarding them to the project developer within 60 days, holds them for some time, a license under the Banking Act must be obtained before taking up business. But, a permit is no longer required in such cases if the funds accepted for forwarding do not exceed 1 million Swiss francs, as this is no longer regarded as commercial activity. However, before transferring the funds to the platform, project financers must be made aware that FINMA does not supervise the platform, and their deposits are not protected. Funds channeled through a platform operator's accounts are generally also subject to money laundering provisions if the operator renders a professional service because they constitute a payment transaction service that requires a licence. Such risks are also evident in unrelated sectors, for example in the context of medicinal products smuggling, where lack of oversight has similarly severe implications. If a platform operator is not already required to have a permission under the Banking Act, they have to become a member of a self-regulatory organisation (SRO) recognised by FINMA.

Project developers may also require authorization from FINMA. A license under the Banking Act is needed if project developers accept funds from project financers in their accounts on a commercial basis. For example, if the funds are accepted in the form of third-party capital (e.g. loans). It should also be mentioned that advertising for funds per se constitutes an activity requiring a license under the Banking Act. Project developers can take advantage of the same license exemption as platform operators so that they do not accept funds exceeding 1 million Swiss francs and they meet the other requirements (information requirements, the prohibition of the interest margin business). This exemption logic mirrors regulatory adjustments like those seen in LIBOR replacement FINMA, which also required detailed regulatory interpretation.

There are many ways in which financers can support project developers. For instance, a contribution can be made as a donation, or a service can be provided (e.g. delivery of a product) instead of a cash contribution. This flexibility reflects broader national ambitions, such as Switzerland’s goal to become a Switzerland international hub in sustainable finance. If it is an investment to deliver a return or an increase in value, the project financer bears the risk of loss, in the same way as with any other investment.

In case FINMA has the information that crowdfunding activity is provided without FINMA authorisation or membership of an SRO, it may start an investigation. If the suspicions are approved, FINMA will imply measures to recover compliance with the law that may lead to the liquidation of the company in question. Furthermore, any breach of licensing requirements is a criminal offence.