Switzerland’s financial regulator, the Swiss Financial Market Supervisory Authority (FINMA) has recently released guidelines that indicate that the body will supervise Initial Coin Offerings (ICOs) to ensure that they are Anti Money Laundering (AML) compliant among other such related requirements.
There has been an increase in the number of ICOs coming out of Switzerland as such FINMA deems it necessary to clarify how token issuers can conduct their token sale events. The increase in the number of Swiss ICOs has also seen some stakeholders asking the FINMA for regulation to guide these activities. The Financial Times reports that FINMA has received hundreds of requests asking for the enactment of some guidelines.
The FINMA release notes that the guidelines are not applicable to all ICOs – it states that the processes of some ICOs do not require regulation; as such the implementation of guidelines will be on a case-by-case basis.
The purpose of the ICO and issued tokens will be a factor to consider for the proper application of requirements. Another factor to consider will be whether or not the tokens are tradeable as of the time of the ICO event.
The lines between use cases of project tokens are still pretty much blurred as such the FINMA as decided to come out with the following categorization modalities.
ICO Token Classification by FINMA
Payment Tokens: These are simply a medium of exchange for goods and services. In other words, they are a means of payment and can be practically regarded as cryptocurrencies – these tokens are not linked to any special development projects. Such tokens will not be considered as securities, but they will have to comply with Anti-Money Laundering (AML) laws.
Utility Tokens: Tokens that fall under this category simply confer digital access rights to an application or service and as such they are not regarded as securities. Utility tokens ideally do not require any form of regulation unless they have an element of investment with some promise of economic returns.
Asset Tokens: These are securitized tokens that will be treated as equities, bonds and other such related investment financial instruments. These tokens are structured to pay token holders some dividends and also guarantee interest returns. These ICOs and tokens have strict requirements to meet to ensure that they are well-prepared to execute and make true their promise of interest and dividend payments to their investors.