Switzerland and Germany Financial Authorities Released ICO-Specific Regulatory Guidelines

The financial authorities of Switzerland and Germany took the first steps in clarifying the rules applicable to ICO (Initial Coin Offerings), a field that proved to be very difficult to legislate.

The Swiss Financial Market Supervisory Authority (FINMA) published a set of guidelines that classifies the ICOs and clarifies the legislation that ICO initiators must respect.

In mid-February, as a result of numerous requests for information, the Financial Market Supervisory Authority of Switzerland (FINMA) published an ICO-applicable guide that includes details of the applicable fund-raising laws and the degree of supervision to which they will be subject to these initiatives.

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In FINMA's statement, it is underlined that tokens must comply with certain laws depending on the category they fall into:

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• Payment ICOs that do not have other functions or links to other development projects.

They will be subject to anti-money laundering legislation, but will not be treated as securities.This implies that the financial intermediaries (such as exchanges) are obligated to "Establish the identity of the holders and beneficiaries".

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• Utility ICOs:- designed to provide digital access to specific applications or services.

As long as the application / service does not represent an investment in economic terms, then the tokens aren't considered securities.

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• Asset ICOs: - which represents a part of the assets of the issuing company or entitles the holder to a part of the income / profits obtained by the issuer (similarly to shares held in a listed stock market company).

These are treated as securities under the law and will be treated in the same way, as bonds or shaes in a company.The law in this case provides that issuers must make available to purchasers "a clear set of informations and easy-to-check ".

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ICOs can also exist in hybrid forms of the above categories and will be evaluated from the perspective of the applicable legislation for all categories in which it falls.

FINMA Director, Mark Branson, said:

“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."

FINMA recognises the potential of blockchain and supports the federal government's Blockchain/ICO Working Group in which it is participating.

"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."

• FINMA Director, Mark Branson

Similarly, the Federal Financial Supervisory Authority of Germany (BaFin) issued a statement clarifying how ICO activity can be carried out legally. Unlike Switzerland, Germany has decided to evaluate each ICO in part, from the perspective of the applicable legislation.

"Operators wishing to launch ICOs on German territory have the opportunity to get advice and support from BaFin from the perspective of determining the legal areas in which they fall because tokens can be different types of financial instruments, from bond to payment methods. "

Thus, it is recommended that before launching an ICO, initiators should contact the BaFin local offices to clarify the legal issues.

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The initiatives of Switzerland and Germany are the first steps taken by the authorities in the ICO regulation, with several European countries currently working on draft laws applicable in this area.

The Spanish government has announced that it is currently working on a set of laws to provide incentives to blockchain companies,the Gibraltar Financial Authority is working on ICO regulation, and the UK Treasury Committee has initiated a blockchain investigation and regulatory arrangements to ensure its integration into the financial landscape and protect the public from financial risks.

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