03 Jan All About STO Regulations in Switzerland
Security tokens are all the rage right now in the blockchain space. This is because they are viewed as a potentially solid alternative to coins used in traditional ICOs. Security tokens are tied to real-world assets such as dividends, profit shares, interest, etc.
In other words, security tokens are much more tangible and many would say, trustworthy, than utility tokens or payment tokens which are often used in traditional ICOs. However, because security tokens and the so-called Security Token Offerings (STOs) are relatively new, many are uncertain about the processes including the STO regulations in Switzerland.
Here’s what you need to know about regulations in Switzerland regarding STOs.
STOs are Regulated by FINMA, the Swiss Financial Market Supervisory Authority
FINMA is very similar to the Securities and Exchange Commission (SEC) in America. It makes all the decisions regarding the legal regulations of STOs in Switzerland.
FINMA Released Guidelines in 2018 Which Categorizes Tokens into 3 Groups
The three groups of tokens which FINMA has specified in its guidelines are payment tokens, utility tokens, and asset/security tokens. Payment tokens are tokens that are used as a means of payment for acquiring goods or services. Utility tokens are tokens that grant access to the use of an application or service which is digitally-based. Finally, asset/security tokens are tokens that represent actual assets like dividends, profits, or interest.
According to FINMA, Security Tokens are Subject to the Same Regulations as Other Securities such as Stocks, Bonds, and Derivatives
This means that any company who offers an STO will have to comply with all of the same laws that they would have to comply with if they were offering stocks, bonds, or derivatives to the public. A failure to comply with these laws can result in punishments.
STOs are Subject to KYC Laws
To prevent various types of fraud and to help regulators to do their jobs, STOs are subject to KYC (Know Your Customer) laws.
STOs are Also Subject to the “Big Five” Swiss Banking Regulations
These regulations are the Stock Exchange Regulation Act, the Anti-Money Laundering (AML) Regulations, Banking Regulations, Financial Market Infrastructure Regulations, and Collective Investment Scheme Regulations.
All of these regulations are designed to keep markets fair and ethical and to protect investors. FINMA is responsible for upholding these regulations and making sure that all companies who plan to launch STOs comply with them. If your company is thinking about launching an STO than it is imperative that you comply with all of these regulations.
Payment tokens and utility tokens have already become extremely popular in blockchain space for fundraising. However, STOs could be a way for companies to get more funding from traditional and institutional investors since they are more similar to the securities that these types of investors usually invest in.
So, in the very near future, it is quite possible that STOs could rise significantly in popularity. If this is the case, then the STO regulations in Switzerland that FINMA has put into place are going to become more and more important in the blockchain industry.