London – The EU has followed suit with its Mica (Markets in Crypto-Assets) crypto regulatory directive, but Switzerland is still a few steps ahead. This is not only due to the content of laws and regulations, but also to the will that is followed. The Swiss supervisory authority Finma constantly adapts the regulation to new conditions, also very pragmatically, without requiring a new law each time. This strengthens the crypto ranking tremendously and attracts more and more companies.
By Natasha Gonseth, Head of Compliance at BCB Group
After FINMA first categorized tokens in its guide to Initial Coin Offerings (ICOs) and assessed them against financial market legislation, the EU has now also become active. The procedures used by the two regulators differ on a number of points. In any case, this initiative to create a solid legal framework for crypto-assets is to be welcomed. And for cross-border issuance, the Mica Regulation will also be relevant to Swiss issuers, as its scope extends to crypto tokens or services issued in the EU.
Basically, both regulators perform a categorization first and foremost. Finma distinguishes between three functional types, although mixed forms may also occur: Payment tokens are equated with pure cryptocurrencies without being linked to other functionalities or projects. In certain cases, tokens can only develop the necessary functionality and acceptance as a means of payment over time. Utility tokens are tokens intended to provide access to a digital utility or service, while asset tokens represent assets such as shares in fixed assets, companies, earnings or the right to dividends.
Advantage Switzerland: Regulation of financial instruments such as tokens
Unlike Switzerland, the Mica Regulation does not cover tokens that qualify as financial instruments. The first glitter subcategory includes a type of crypto value used to provide digital access to a good or service available on blockchains, so-called utility tokens. Another subcategory of cryptoassets are value-referenced tokens, essentially stablecoins. The third sub-category of crypto-assets are those that are primarily intended to serve as means of payment and are only linked to a nominal currency for the purpose of value stabilization, so-called e-tokens.
As a starting point, you can work with this classification. However, the fact that the EU does not regulate any financial instruments such as tokens excludes a wide range of services. At the same time, customers’ appetite for diversification through crypto investments is increasing. To do this, it is crucial that they benefit from effective support from crypto-asset providers – and these in turn need legal clarity. Mica will introduce new rules for several players in the crypto market. In addition to exchanges, issuers of stablecoins that are linked to existing assets, such as the US dollar or the euro, are particularly affected. The focus is also on increased information requirements to ensure consumer protection. Overall, however, it is to be welcomed that the crypto market is regulated more clearly and that uncertainties are also removed in the EU. Even if the EU is not quite as advanced as Switzerland.
“Same business, same rules” as a principle of the Swiss authorities
This is also because the Swiss regulator applies the principle of “same company, same rules” to any kind of new technology. So there is no difference whether it is a traditional, crypto or blockchain based business model. In addition, the Swiss regulatory authorities communicate very openly with the crypto companies and the entire industry. Companies and experts are involved, questions are answered quickly. As a result, Finma is perceived internationally as open to crypto, which in turn makes the location very attractive and attracts more crypto companies. (BCB Group/mc/hfu)