A Comprehensive Guide to Setting Up a Crypto Business in Switzerland

Switzerland has become a global hub for cryptocurrency and blockchain businesses, thanks to its supportive regulatory environment and strong financial infrastructure. This article provides a detailed guide on how to establish a crypto business in Switzerland, covering the regulatory requirements, types of authorizations, and practical steps needed to launch your venture.

The Swiss Regulatory Environment

Switzerland’s regulatory framework for financial activities is managed by the Swiss Financial Market Supervisory Authority (FINMA). FINMA oversees banks, insurance companies, and crypto projects, ensuring that they comply with the country’s financial laws. There are five types of authorization for financial activities in Switzerland: licensing, recognition, authorization, approval, and registration. However, for fintech and crypto startups, the most relevant types are recognition and authorization.

Types of Authorization:

1. Recognition: Applicable to entities that meet certain standards set by FINMA.
2. Authorization: Required for businesses involved in activities like asset management, foreign exchange, and money transfers.

Each type of authorization dictates specific permitted activities, client onboarding procedures, transaction limits, capital requirements, and audit methodologies. Choosing the right authorization type is crucial as it determines your business’s operational scope and legal responsibilities.

Initial Steps: The FINMA Sandbox

One of the first steps in establishing a crypto business in Switzerland is leveraging the FINMA sandbox. This regulatory sandbox allows startups to develop products, accept customer funds, and offer financial services up to a limit of 1 million Swiss francs without immediate need for full authorization. Key conditions include:

• The total amount of assets from clients must not exceed 1 million Swiss francs.
• Funds received must not be invested or accrue interest.
• Depositors must be informed that their funds are not insured by FINMA.

Operating within the sandbox can significantly reduce initial costs and expedite the development and launch of your product.

Joining Self-Regulatory Organizations (SROs)

For startups that exceed the sandbox limits, joining a self-regulatory organization (SRO) is the next step. Switzerland has 11 SROs that oversee financial intermediaries. Becoming a member of an SRO allows businesses to conduct various activities like asset management and foreign exchange transactions. The cost of joining an SRO, including annual fees and audit costs, is significantly lower than obtaining a full banking license.

Steps to Join an SRO:

1. Choose the appropriate SRO based on your business model.
2. Prepare a detailed application with the help of legal experts.
3. Undergo the SRO’s review process, which typically takes three months but can be expedited for an additional fee.

Membership in an SRO provides a flexible regulatory framework, enabling businesses to offer financial services while ensuring compliance with Swiss laws.

Leveraging Regulatory Exceptions

Switzerland’s regulatory environment offers several exceptions that can reduce the burden on fintech and crypto businesses:

1. Sandbox Exception: As long as the business remains within the sandbox limits, it does not need a banking license.
2. Savings Exception: Certain payment systems and neobanks can operate without a savings license if they meet specific conditions, such as prohibiting peer-to-peer transactions and maintaining low client balance limits.
3. Settlement Accounts: Non-bank companies can use settlement accounts for client transactions without them being considered deposits, provided no interest is credited, and the transaction duration is limited.

These exceptions are crucial for reducing initial regulatory burdens and speeding up the launch process.

Building the Right Business Architecture

Crypto businesses need to design their operations carefully to comply with Swiss regulations. Key considerations include:

• Ownership and Control: Ensuring that the ownership of cryptocurrency by clients is recorded on the blockchain and is distinct from the company’s funds.
• Private Key Management: Structuring the storage architecture so that clients retain control of their private keys, with the company only holding keys on a lease basis.

By adhering to these principles, crypto startups can avoid the need for a banking license and operate within the legal framework.

Conclusion

Switzerland offers a favorable environment for crypto businesses, with clear regulatory guidelines and support structures. By understanding and navigating these regulations, leveraging the FINMA sandbox, joining an SRO, and utilizing regulatory exceptions, entrepreneurs can successfully launch and grow their crypto ventures in Switzerland. Whether you’re a startup or an established company, the Swiss regulatory framework provides the flexibility and support needed to thrive in the dynamic world of cryptocurrency.