Cryptocurrency Regulation in Switzerland: Tokens
Switzerland has positioned itself as a pioneer in the legal framework for cryptocurrencies and tokens. With the emergence of Crypto Valley in Zug, the country has developed a sophisticated regulatory framework that distinguishes different categories of tokens according to their economic functions. This pragmatic approach has attracted numerous international blockchain projects seeking legal certainty. FINMA (the Swiss Financial Market Supervisory Authority) has established clear guidelines on the classification of tokens and their associated regulatory requirements.
Legal Classification of Tokens under Swiss Law
The Swiss regulatory framework is distinguished by its functional rather than formalist approach to tokens. FINMA has established a taxonomy that categorises tokens according to their economic function rather than their technical structure. This classification, which has become an international reference, comprises three main categories.
Comparative Table: Payment vs Utility vs Asset Tokens
| Criterion | Payment Token | Utility Token | Asset Token |
|---|---|---|---|
| Primary function | Means of payment and value transfer | Access to a digital service | Claim or participation (share, bond) |
| Example | Bitcoin (BTC), Litecoin | Access token for a SaaS platform | Security token (tokenised shares, bonds) |
| Security? | No | No (if immediate use possible) | Yes |
| Principal applicable law | AMLA | CO, AMLA (if hybrid) | FMIA, FinSA, CO |
| Prospectus obligation | No | No (unless hybrid) | Yes (except FinSA exemptions) |
| SRO/FINMA obligation | Yes (intermediaries) | Partial | Yes |
| Tax treatment (natural person) | Wealth + capital gain (private = exempt) | Wealth + capital gain (private = exempt) | Wealth + income (dividends, interest taxable) |
Payment Tokens
Payment tokens are designed as means of payment for the acquisition of goods or services, or as means of value transfer. They do not establish a claim against a specific issuer. Bitcoin is the most well-known example of this category. From a regulatory standpoint, these tokens:
- Are assimilated to means of payment under the Anti-Money Laundering Act (AMLA)
- Require their issuers and intermediaries to comply with due diligence obligations in the fight against money laundering
- Are not considered securities within the meaning of the Financial Market Infrastructure Act (FMIA)
Asset Tokens
Asset tokens represent a claim against their issuer. They may take the form of a debt claim (bond) or equity claim (share). FINMA generally considers them to be securities, which triggers a set of regulatory obligations:
- Application of the provisions of the Code of Obligations concerning the issuance of shares or bonds
- Compliance with the FMIA regarding the trading of securities
- Potential submission to the Collective Investment Schemes Act (CISA) if the token represents a right in an investment vehicle
Characterisation as a security entails in particular prospectus obligations on public issuance, although exceptions exist for small issuances (less than CHF 8 million) or those aimed at a limited number of qualified investors.
Utility Tokens
Utility tokens give access to a digital service on a blockchain infrastructure. They are generally not considered securities if their primary function is to confer a right of access to a service and if the token can be used at the time of its issuance. However, if a utility token presents investment characteristics, it may be characterised as a hybrid token and partially subject to the asset token regime.
Token Issuance Procedure and Legal Requirements
The issuance of tokens in Switzerland, commonly referred to as an Initial Coin Offering (ICO) or Security Token Offering (STO), is governed by a set of rules that vary according to the token's classification.
Legal Structure and Preparation
Before issuing tokens, establishing an adequate legal structure constitutes a fundamental step. Common structures include:
- A Swiss corporation (SA) to benefit from a clear governance structure
- A Swiss foundation, particularly for non-profit projects
- A limited liability company (Sàrl) for smaller-scale projects
Preparation also includes drafting a white paper, a document detailing the project, its objectives, the technology used, the team and the intended use of funds.
Anti-Money Laundering Obligations
All issuers of payment tokens and intermediaries that facilitate their transfer must:
- Affiliate with a self-regulatory organisation (SRO) recognised by FINMA or obtain FINMA authorisation directly
- Implement client identification procedures (KYC – Know Your Customer)
- Verify the identity of the beneficial owners of funds
- Document significant transactions
DLT Act and Asset Tokenisation
The progressive entry into force of the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (DLT Act) between 2021 and 2022 marked a major advance for asset tokenisation in Switzerland. This act introduced:
- The concept of registered uncertificated securities allowing rights to be represented on a distributed ledger with the same functions as a physical security
- A legal framework for the transfer of these registered uncertificated securities via blockchain
- A new licence category for DLT-based trading systems
- Clarifications on the treatment of cryptoassets in the event of bankruptcy
Frequently Asked Questions about Tokens under Swiss Law
How does FINMA determine the category of a token?
FINMA examines the actual economic purpose of the token (substance over form). It analyses the rights conferred on holders, the moment of possible use and the nature of the issuer's obligations. A token may be hybrid and combine several characterisations. FINMA may be consulted via its FinTech Desk before launch.
Is a utility token always exempt from financial regulation?
No. A utility token may be characterised as a hybrid token if it presents investment characteristics (expected return, speculation). In that case, securities regulation may partially apply. The distinction is assessed case by case by FINMA.
Is a prospectus required to issue security tokens in Switzerland?
In principle yes, if the tokens are offered to the public. The FinSA provides for exemptions notably for offers of less than CHF 8 million over 12 months, offers to fewer than 500 investors, or offers reserved for professional investors. The prospectus must be validated by a review body approved by FINMA.
What is a registered uncertificated security under Swiss DLT law?
A registered uncertificated security (Registerwertrecht) is a new type of financial instrument introduced by the DLT Act of 2021. It allows rights (shares, bonds, etc.) to be represented on a distributed ledger with the same legal effects as a physical security. This mechanism facilitates the tokenisation of Swiss shares and bonds with full legal certainty.