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Gibraltar and Switzerland — Charting new territory

In the world of ICO (initial coin offering) legislation, no jurisdiction has been more progressive than Switzerland and Gibraltar. They may have received a bad rep at times, but for the most part, they have taken initiative, given some legitimacy to the market and facilitated a more efficient flow of capital into the nascent markets of decentralized finance.

Yes — many arguments can be made on each side about the way the countries are structured, their tax havens, and banking secrecy laws — but in the context of innovative legislation and regulation, all of that is irrelevant. Instead, what I would like to focus on are specific aspects of legislation that have come into play, setting a precedence and baseline for others to join.


The Swiss Financial Market Supervisory Authority (FINMA) recently published new principle-based guidelines. Naturally, with an exponential increase in offerings through Switzerland, people have been cautious…and rightly so. The key takeaways: an enhanced framework, clarification around the different types of tokens, AML considerations, and a structured way for new issuers to reach out to and engage with regulators.

Even a fancy table — but not sure if this received a overwhelming response…

The AML Considerations (left image) provide a general framework around assessing where a certain type of token falls, albeit being slightly confusing in its wording.

More importantly, the breakdown of tokens into three categories was a defining factor of the guidelines, which I personally think are accurately representative of the growing marketplace.

Here is a summary of the classification breakdown:

  • Payment tokens/Cryptocurrencies: Tokens intended to be used, now or in the future, as a means of payment value transfer. No claims to issuer.
  • Utility tokens: Tokens intended to provide access digitally to an application or service.
  • Asset tokens: Tokens that represent assets, such as a debt or equity claim on the issuer. Analogous to equities, bonds or derivatives. Tokens which enable physical assets to be traded on the blockchain also fall into this category.

And of course, there is some room for interpretation with the term 'hybrid tokens’. For example, according to FINMA, asset and utility tokens can also be classified as payment tokens. In these cases, the tokens are both securities and a means of payment.


Gibraltar Distributed Ledger Technology (DLT) Framework is focused on a principle-based approach; I think they said it best here:

A flexible, adaptive approach is required in the case of novel business activities, products, and business models. We consider that regulatory outcomes remain central but are better achieved through the application of principles rather than rigid rules. This is because for businesses based on rapidly-evolving technology, such hard and fast rules can quickly become outdated and unfit for purpose.

A monkey on the Gibralter Rock

What makes things interesting — which people forget — is that even with new regulatory rules, “firms and activities that are subject to another regulatory framework continue to be regulated under that framework.”

So if you have a real estate token or any kind of securities token — you need to comply with existing regulations, remember — a token is not always a new business model, but rather a mechanism that can be adapted to existing models. In some ways this is similar to the discussion of how most ICOs, contrary to popular online lingo, are not a new asset class but rather a new financial instrument.

For example, within the DLT framework “a DLT Provider must have systems in place to prevent, detect and disclose financial crime risks such as money laundering and terrorist financing.” That means they still have to comply with Proceeds of Crime Act under the Gibraltar Financial Services Commission. That includes KYC, AML, CTF, and the rest of the regulatory acronym soup. (I don’t think anyone will want to read that act in detail — so I will refrain from posting here!)

Bottom Line

These rules are not perfect, but again, that is not the point here. What is more important is that regulators across the globe are taking proactive steps, reaching out to appropriate parties, and seeking guidance and education in a fast-moving, innovative space that is potentially changing every industry as we currently know them.

Many are going towards principle-based regulation, which allows room for interpretation and future guidance. We have seen Wyoming pass a bill that exempts ICOs from securities regulation under certain conditions this month and other regulators are stepping up not only to tackle this beast effectively but also to stake a claim for a potential economic boost!

Shoutout to our hometown — Vancouver, BC

We are proud to live in a place that is both beautiful and progressive. A noteworthy mention is the British Columbia Securities Commission (BCSC) Sandbox, which has shown a willingness to be innovative and take on new projects. They have recently put forth a request for comment around Fintech, which was well put together, and we are looking forward to contributing and helping to shape the next generation of regulatory frameworks. I encourage all who are able to do the same.

Shameless plug for Beautiful BC

Q (Qayyum Rajan) is Co-Founder and Head of Product Strategy for iComplyICO, an automated compliance protocol that enables ICO issuers, security token platforms investors to both launch and trade tokens in compliance with global securities, identity, and privacy regulations.

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Any opinions or recommendations expressed herein do not necessarily reflect those of iComply Investor Service Inc. iComplyICO and its affiliates do not offer accounting, tax, legal, or compliance advice, services, or opinions. This material is not intended to provide, and should not be relied on for, tax, legal or accounting advice and has been provided for informational purposes only. You should consult your own tax, legal, compliance, and accounting advisors before engaging in any transaction. ‘Prefacto’, ‘iComply’, and ‘iComplyICO’ are copyright and trademark of iComply Investor Services Inc.

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