What you need to know about launching an ICO in Switzerland
Andreas Glarner, one of the leading experts on the legal side of blockchain technology, explain at the Crypto ICO Summit the difference between the three types of tokens.
On February 16, 2018, FINMA publishes ICO guidelines where sets out how it intends to apply financial market legislation in handling inquiries from ICO organizers. Swiss Financial Market Supervisory Authority, FINMA, is the Swiss government body responsible for financial regulation.
FINMA categorizes tokens into three types, but hybrid forms are possible.
Payment token shall be used on to settle transactions and not necessarily transactions between the issuer and the contributor or a third party but between uses of particular technology.
They are tokens which are intended to be used, now or in the future, as a means of payment for acquiring goods or services or as a means of money or value transfer. Cryptocurrencies give rise to no claims on their issuer.
“Payment tokens are designed to act as a means of payment and are not analogous in their function to traditional securities, FINMA will not treat payment tokens as securities.” Guidelines – Finma
Utility tokens are tokens which are intended to provide access digitally to an application or service using a blockchain-based infrastructure. FINMA will not treat them as securities, as long as the companies have no investment purpose.
The main purpose of ICOs are to raise funds for developing a platform – the platform is not accessible at the time of the token issuance. Consequently, according to the wording of the ICO Guidelines, in the majority of cases, FINMA would qualify a ‘platform token’ at the time of the ICO as a security token rather than a utility token.
It’s currently unclear whether FINMA requires full access to an already established platform for such qualification or regards a beta version of the platform as sufficient qualification as utility token. However, if the token qualifies as security, a prospectus according to the Swiss Code of Obligations (CO) may have to be issued.
Asset tokens represent assets such as a debt or equity claim on the issuer. They promise, for example, a share in future company earnings or future capital flows. Concerning their economic function, therefore, these tokens are analogous to equities, bonds or derivatives. Tokens which enable physical assets to be traded on the blockchain also fall into this category.
Switzerland is currently one of the preferred jurisdictions for companies seeking to raise capital through ICO or issuing tokens for other purposes. Also, Malta is going to publish its regulation of ICOs and cryptocurrencies this year.
Tim Draper said that Malta is the only country currently thinking of making specific regulations for ICOs and cryptocurrencies and not trying to integrate it into existing ones.