Swiss Financial Supervisor Publishes Guidelines To Support ICOs

Francisco Memoria
  • Switzerland's financial watchdog recently published guidelines to support ICOs in the country
  • Guidelines define three different ICO categories to help entrepreneurs
  • Regulator will regulate ICOs under anti-money laundering laws and as securities

Switzerland’s financial supervisor, the Financial Market Supervisory Authority (FINMA), recently published guidelines in support of initial coin offerings (ICOs). The regulator’s guidelines reveal it will treat some tokens as securities.

Through a press release, FINMA revealed it has been witnessing a substantial rise in the number of ICOs launching in Switzerland, which led to a spike in inquiries it’s been receiving about applicable regulations. The press release starts by clarifying financial market laws and regulations aren’t applicable to all ICOs. As such, the applicability of regulations to blockchain-based tokens will be determined on a case-by-case basis.

FINMA’s guidelines reveal the organization will focus on the economic purpose of the tokens ICOs will issue, as well as on the “underlying purpose of the tokens and whether they are already tradeable or transferable.”

Taking this into account, FINMA outlined three different ICO categories, based on the purpose of their underlying tokens. These categories include “Payment ICOs,” “Utility ICOs,” and “Asset ICOs.”

Payment ICOs would issue payment tokens, which are only to be used as a payment method. Utility tokens, issued in Utility ICOs, are “tokens which are intended to provide digital access to an application or service.” Asset tokens, issued in Asset ICOs, represent participation in a company or earning stream, or “an entitlement to dividends or interest payments.”

These guidelines are set to help entrepreneurs know when they will have to apply anti-money laundering and securities laws. Payment ICOs will have to comply with anti-money laundering (AML) regulations, while Utility ICOs will quality as securities if their tokens “function solely or partially as an investment in economic terms.” 

FINMA CEO Mark Branson commented the organization’s move, stating:

“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.”

Mark Branson

FINMA will see asset tokens, issued in Asset ICOs, as securities, as these represent participations in companies or earning streams, or an entitlement to dividends or interest payments.

The regulator further recognized hybrids can exist, meaning one ICO can be included in more than one of the above categories. According to the Financial Times, Oliver Bussmann, president of the Crypto Valley association in the canton of Zug, predicted FINMA’s guidelines will increase the number of Switzerland-based ICOs. He said:

“It’s about establishing a sustainable business in Switzerland – and not just about raising capital and moving on. If you remove uncertainty, it attracts more business.”

Oliver Bussmann

OneCoin Denies Being a ‘Hybrid Ponzi-Pyramid Scheme’

The controversial OneCoin organization has recently responded to the Central Bank of Samoa, claiming it isn’t a “hybrid ponzi-pyramid scheme” as it doesn’t fir the definition of these schemes, and that it is a centralized, closed cryptocurrency.

According to the Samoa Observer, the Central Bank of Samoa claimed OneCoin is a “hybrid ponzi-pyramid scheme” that “laundered money through New Zealand to Samoa.” It also claimed the organization was targeting local residents through churches.

The organization, widely believed to be running a pyramid scheme using the cryptocurrency space, sent a statement to the Observer defending itself, claiming it’s neither a pyramid nor a Ponzi scheme. It’s worth noting individuals associated with OneCoin have been arrested and charged in various countries, including China and India.

In its response, OneCoin argued that Ponzi schemes see the revenue of old investors be “generated through the investment of new investors,” and that it doesn’t require its agents, known as Independent Marketing Associates (IMAs), to recruit others in order to earn bonuses.

Its defense revolves around IMAs not being “obliged to incur any additional expenses or recruit a new IMA,” and that they are rewarded for the “value of [their] sales,” not for recruiting new agents.

The organization added pyramid scheme regulations are these for “consumer protection,” and that its IMAs aren’t consumers. This, as when they join the organization they sign a contract classifying them as “self-employed business owners.”

The users which are part of the OneLife Network are NOT consumers. They are IMAs, meaning they are self-employed business owners.

As CoinDesk notes, OneCoin argues it isn’t a pyramid scheme because its agents aren’t seen as consumers and, as such, it can’t be classified under a dictionary definition of a pyramid scheme, and doesn’t force its IMAs to recruit new agents, although they’re incentivized to do so.

OneCoin, instead, argue it is a “centralized, closed cryptocurrency” with strict anti-money laundering (AML) and know-your-customer (KYC) rules, which make it “much more compliant than decentralized [cryptocurrencies].”

As reported, OneCoin’s leaders Ruja Ignatova and Konstantin Ignatov were recently indicted by the U.S. Attorney for the Southern District of New York (SDNY) on charges of wire fraud, securities fraud, and money laundering. Konstantin was arrested in March of this year.

Moreover, earlier this month former OneCoin investor Christine Grablis filed a lawsuit against the organization’s promoters, with Grablis’ attorney claiming OneCoin’s founders created a multi-billion dollar ‘cryptocurrency’ company based completely on lies and deceit.”