FINMA Investigating Swiss ICO Procedures
FINMA, the Swiss Financial Market Supervisory Authority, has announced some key decisions based around ICOs and cryptocurrencies in recent weeks. Until the last few months, the legal status of such events has been mostly existed in a grey area; however, many countries are now weighing in with their views.
The reaction in Switzerland at least has come about due to a significant increase in initial coin offerings conducted in the country. Because of this, FINMA Guidance 04/2017 on this topic has been released. FINMA has also indicated that it is investigating a number of ICO cases to determine whether regulatory provisions have been breached, stating that some ICO activity may prove to be fraudulent.
Analogous to initial public offerings that are carried out by businesses but conducted using blockchain technology, there is a viewpoint that some existing regulations may be applicable to the method of fundraising. Potential areas of applicability that are currently being investigated include provisions on combating money laundering and terrorist financing, banking law provisions, provisions on securities trading, and provisions set out in collective investment scheme legislation. FINMA stated that collecting funds for a personal account, without a platform or issuing house, is unregulated from a supervisory perspective in cases where repayment is not obliged, payment instruments have not been issued and no secondary market exists. It also reminded investors of the price volatility associated with cryptocurrencies and cautioned against investing in projects which are still early in development and have uncertain financial futures.
Despite this news, FINMA has reaffirmed its stance on supporting blockchain technology, saying it recognises its innovative potential, and indeed it has been supporting efforts in developing and implementing blockchain solutions in the Swiss finance industry for a number of years.
Previously, FINMA has closed down unauthorised providers of fake cryptocurrencies. Developers of ‘E-Coin’ had been found to have accepted over four million Swiss francs in public deposits without holding the required banking licence, resulting in FINMA launching bankruptcy proceedings against the legal entities involved. Other companies have been placed on a warning list due to suspicious activity.
