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Companies and projects have increasingly relied on the sale of digital assets, or tokens, as a means of fundraising. These tokens generally do not grant the holders an ownership interest in the issuing company or project, but may provide governance rights, access rights or other utility. This has been conducted through public sales known as initial coin offerings (ICOs), proliferation through token generation events (TGEs) or private sales, among other mechanisms. While showing characteristics of traditional methods of fundraising, there are a range of unanswered questions related to the legal classifications of such products. As ICOs and TGEs will usually be distributed online and internationally, there is usually no single legal framework applying to such transaction, and the legal framework of each market in which the tokens may be offered or sold needs to be considered.
Introduction
Attitude of the country towards ICOs/token sales
The climate towards ICOs in Switzerland is in general good and Switzerland is considered as an attractive jurisdiction for ICOs. In the recent years, some of the larger ICOs took place in Switzerland.
Legal affairs
Presence of any explicit regulation on ICOs and the issuance of token/coins
Swiss law does not know an explicit regulation of ICOs and the issuance of token/coins. However, certain aspects fall under financial-market law.
Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins
No explicit restrictions exist in Switzerland. However, in particular in case tokens qualify as securities, the financial market rules apply including respective restrictions and licensing requirements.
Obligations and requirements to issue token/coins
The procedure to be followed when executing an ICO is set out in the FINMA guideline regarding initial coin offering. In this guideline, FINMA explains the legal framework applicable to ICO’s and how to apply the Swiss Financial Market laws. Further, FINMA issued a guideline regarding stable coins in 2019, giving relevance to the money laundering, banking, fund management and financial infrastructure as well as securities trading regulation.
In case tokens are linked to a repayment obligation, the issuance may qualify as accepting deposits from the public (or advertising of such activity) which may trigger a banking license requirement.
If tokens of an ICO are to be qualified as securities, the financial market rules will apply accordingly. In particular the public offering of such tokens which qualify as securities may trigger the prospectus requirement under FinSA.
The law on collective investment schemes including respective licensing requirements may apply in case the funds accepted in the context of an ICO are managed by third parties.
If a trading platform aims to deal in asset tokens, in addition to payment and utility tokens, the asset tokens probably qualify as securities as defined in the FinMIA. Platform securities trading is regulated by the FinMIA. According to the FinMIA, trading platforms require a licence to operate as an exchange or multilateral trading system to trade in securities in this way. Under the law, only regulated institutions, but not private persons, may be admitted participating in an exchange or MTF. OTFs on the other hand, allow discretionary bilateral or multilateral securities trading. OTFs may be operated by banks or securities dealers and, unlike exchanges and MTFs, may also admit private clients. Supply of and demand for tokens come together on trading platforms, for example in an order book. Centralised trading platforms manage clients’ crypto currency assets in their own wallets and have access to their private keys. They often hold client funds in a nationa