Switzerland prepares to relax fintech regulations

Switzerland has a long-established reputation as the globe’s premier centre for offshore wealth. Household names like UBS and Credit Suisse have helped the country to solidify its reputation as a formidable financial centre, while generous taxation laws have lured corporations from across the world to settle in and around Zurich. Payments companies, software providers and blockchain developers have all flocked to Switzerland over the course of the past two decades.

Yet as rival jurisdictions begin to introduce new tax incentives and regulatory sandboxes designed to foster innovation and re-sculpt the payments landscape overseas, Swiss regulators appear keen to try and stay ahead of the competition by further incentivising the launch of new fintech ventures.

Earlier this week, the Swiss Financial Market Supervisory Authority (FINMA) announced firm plans to relax the country’s anti-money laundering regulations for smaller fintechs. Examples of proposed rollbacks include minimising the lengthy and costly due diligence application process that Swiss financial institutions are currently expected to carry out in order to demonstrate their commitment to prevent fraud.

Likewise, FINMA said in a statement that it intends to remove the requirement for small institutions – which it has defined as any financial organisation with gross revenues of less than $1.5m – to establish their own independent anti-money laundering units with specified and regular monitoring duties.

The intended changes will be laid out in full after the completion of a consultation period that’s expected to go on until October 26. Yet the implementation of FINMA’s new rules for small firms are tentatively expected to come into effect at the start of January 2019 to coincide with the deployment of parliament’s new and improved Swiss Banking Act.

In June, Swiss lawmakers voted to amend the country’s most definitive piece of financial legislation by inserting a new legal distinction between fintechs and traditional banks. Until now, all fintech companies operating in Switzerland were forced to apply to the government for a generic banking license – which would in turn require those companies to comply with a host of regulatory measures designed to police large financial institutions.

But after the government’s planned changes come into effect on 1 January 2019, a new fintech license is set to be created for all organisations that use funds and provide certain financial services without actually profiting from investment or receiving any interest off the back of any relevant funds. The new fintech license will apply to all companies accepting public deposits of around $100m or less.

Paired alongside this week’s announcement of FINMA’s anticipated regulatory amendments, the move is evidently part of a wider programme of changes designed to shore up Switzerland’s position as a warm and welcoming home for small fintechs and payments providers. Businesses offering crowdfunding services should enjoy a particular boost, as the country’s current regulatory regime demanded they apply for a banking license despite bearing almost no resemblance to a traditional financial institution.

Yet above all else, the move should help to attract small creative start-ups capable of supporting and solidifying the reputation of Switzerland’s thriving blockchain ecosystem. The country currently houses an estimated 430 crypto labs, start-ups and incubators – and the ancestral home of Bitcoin rival Ethereum can be found just road from Zurich in the small town of Zug.

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