All there is to know about Crypto Regulations in Switzerland

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If there is one thing that has come to stay in the crypto ecosystem, it is effective regulation. Well, you might say that the government is not supposed to be involved with the sector. But recent events have ensured that a watchdog might be necessary for a market worth billions of dollars. Cryptocurrency regulation revolves around nations enacting rules and regulations that aim to guide crypto activities within their jurisdictions. These regulations, put in place by the nation’s legislators or financial watchdogs, also aim to offer protection to the crypto platform and investors.

Today, the importance of regulation cannot be over-emphasised, as it is critical to the growth of the crypto ecosystem. One advantage of a proper regulatory framework in place is that it protects investors by combating market manipulation and providing a stable ground for all to thrive. Alternatively, financial watchdogs overseeing the crypto market within their jurisdiction can help with asset regulation, and thus prevent investors from committing money to rug pull projects. Proper regulation in place will also help nations, via partnerships with crypto firms, to combat illegal money activities like money laundering. There are also talks that many nations that have put proper regulations in place are earning massive revenue from crypto taxes.

However, in this article, you will know everything about crypto regulations in Switzerland and how it provides a ground for the crypto market to thrive.

Cryptocurrency in Switzerland

Switzerland remains one of the most popular banking and financial terrain in the world, one of the many countries in Europe promoting the adoption of cryptocurrencies. The country, which currently hosts top international organisations like  Red Cross, World Trade Organisation (WTO), and the Bank for International Settlements (BIS),  has continued to promote the adoption of cryptocurrencies since 2016. It is also why the tourist-friendly country has provided an avenue for blockchain technology entrepreneurs to thrive. A quick visit to clearly defines how blockchain and entrepreneurship has been able to redefine the crypto space.

Today, many cities in the country are currently exploring multiple ways of adopting and transacting with cryptocurrency, while the country continues to position itself as a global leader in the blockchain space. For example, its north-central city Zurich became the first to set up a Bitcoin ATM in 2014. Another town Zug followed the footsteps of Zurich and started to accept Bitcoin and Ether for payment of council taxes in 2016. Another Swiss crypto-friendly city Lugano, also announced that it will soon make Bitcoin (BTC), Tether (USDT), and its LVGA a legal tender for transaction purposes. In the announcement, the city also mentioned that it is in a collaboration with stablecoin issuer- Tether, to start accepting taxes in these cryptos.

Cryptocurrency Regulation in Switzerland

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In Switzerland, the provision of crypto exchange and custodian services is legal and regulated by the Swiss Federal Tax Administration (SFTA) and the Swiss Financial Market Supervisory Authority (FINMA). Cryptocurrencies and digital assets are assets or property, and regulators treat matters related to their ownership and transfer, as that of the asset class. FINMA currently governs all matters regarding virtual currency regulation and other digital asset services like decentralised finance (Defi). Alternatively, the Swiss Federal Tax Administration (SFTA)- the country’s tax body, subjects cryptocurrencies to wealth, income, and capital gain tax that must be declared annually in the most transparent manner.

Switzerland’s favourable crypto ecosystem and regulations are why the nation currently hosts the headquarters of many crypto companies like Ethereum, Solana, and Tezos. The country’s regulatory framework has also improved investor security, making it a top destination for crypto entrepreneurs to establish their blockchain startups. Today, the country boasts more than 1,000 blockchain-based tax-paying businesses, contributing effectively to its growing economy and providing jobs for thousands of individuals.

Crypto Regulation in Switzerland: Understanding The rules guiding Crypto Exchange

In Switzerland, crypto exchanges and virtual currency platforms are considered equivalent to financial institutions and must comply with local AML/CFT and consumer protection obligations. Crypto exchanges are expected to obtain a licence from FINMA to operate. As a regulator, FINMA is positive about blockchain technology but monitors all market participants. The financial watchdog does this to ensure that the Swiss blockchain community remains fraud-free, especially in the context of the ICO.

The country is very friendly with legislation, and its financial regulatory body- FINMA, issues four different types of licences to crypto platforms that want to register as either a Swiss AG or GMBH company. These four licences are: Fintech Licence, Exchange Licence, Investment Fund License, and Banking License, and are issued solely based on merit and eligibility.

It is also worth mentioning that since cryptocurrencies are legal in Switzerland, crypto exchanges can convert some crypto assets into Swiss Francs. Also, since it’s impossible to avoid international bank transfers, International Bank Account Number (IBAN) and SWIFT codes are permitted on most cryptocurrency exchanges and platforms in Switzerland. The crypto-friendly nature of Switzerland also makes it possible for crypto holders to sell their assets via crypto exchanges like Kraken and Binance, or peer-to-peer platforms like Paxful. Alternatively, crypto holders can trade off their assets physically in licensed crypto banks like Sygnum Bank AG and Seba Bank AG.

Cryptocurrency Regulation in Switzerland: Taxation

In terms of taxation, Switzerland has no special tax laws for crypto assets and instead subjects them to the already existing SFTA laws for other assets like stocks, bonds, and real estate. However, it classifies crypto investors into three main categories: private investors, self-employed traders, and businesses, with each taxed accordingly.

Fortunately for private investors, they may be exempted from paying capital gains tax if they fulfilled the following criteria;

  • Transaction volumes do not exceed five times the original capital.
  • The asset was held for a period exceeding six months.
  • Capital gains contributed to less than half of overall taxable income.
  • Minimal usage of third-party financing during trading.
  • Derivatives were used only as a hedging tool.

However, commercial crypto traders can carry forward their crypto losses for up to seven assessment years, with their capital gains subject to progressive income tax rates under Swiss laws.

In conclusion, under the SFTA tax laws, yields from crypto mining, staking, and income generated from tokens received via airdrops are subjected to taxes too.

Switzerland’s New Blockchain Act

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After putting proper legislation in place, the Swiss government announced that it will continue to improve upon its policies aimed at promoting cryptocurrency in the nation. Based on this announcement, in 2020, the Swiss Ministry of Finance began consultations on a new cryptocurrency policy that would allow it to take advantage of blockchain technology without stifling innovation. The country then passed a new set of amended laws, set to provide an integrated legal regulation for blockchain technology-based businesses. This law was termed “the Blockchain Act”, and it was enforced in August 2021.

The Blockchain Act was enacted to protect investors’ interests by increasing their legal certainty in events such as bankruptcy, while also providing them a legal basis for trading crypto assets. By implementing this policy, Switzerland aims to position itself as a crypto powerhouse, aiming to improve business conditions and flexibility within its crypto sphere. According to the new Blockchain Act, there is also a new licence category for distributed ledger technology (DLT) or blockchain-based trading system. This new licence is duly supervised by FINMA, and the body is also tasked with providing information on its taxation and ensuring its stability.

Switzerland is also one of Europe’s nations countering cybercrime and combating illegal money crimes, and the company hopes that it can utilise the high-security standard of blockchain technology to win the war.

The Swiss Crypto Region

Due to the crypto-friendly nature of Switzerland, today it hosts a crypto valley in Zug, a town near Zurich. This Swiss blockchain ecosystem currently hosts an active community of enterprises, developers, and service providers, all working in the cryptographic space. While the nation may not be the pioneering leader in the global crypto community yet, one cannot deny its overall contribution and impact on the crypto ecosystem.

Alternatively, projects like Ethereum Foundation and the Diem, which have found a home in the European nation, have cemented their status as Europe’s fastest-growing crypto terrain. Accommodating and promoting these projects is proof of the country’s advancement in regulating fintech and blockchain,  without limiting and stifling their growth. It is also worth mentioning that most of its national laws are top-notch global standards, and they are highly adaptable for crypto enterprises.

The Virtual Currency Mining Regulatory System

Unfortunately, there is currently no legislation in Switzerland regulating the status of miners, as token mining does not require a licence under Swiss law. However, if the miners carry out activities subject to the regulated activities of section ii-vi of the FINMA DLT act, they may need a licence. Lastly, according to Swiss law, the independent issuance of tokens qualifying as securities does not also require a licence if you are a securities firm licensed by FINMA.


WARNING: The investment in crypto assets is not regulated, it may not be suitable for retail investors and the total amount invested could be lost

AVISO IMPORTANTE: La inversión en criptoactivos no está regulada, puede no ser adecuada para inversores minoristas y perderse la totalidad del importe invertido

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