Where in the World to ICO Part 2: Switzerland

Bitcoin fell below $8,000 this week. There have been many articles saying that we will be stuck in a “purgatory” following the bear market, as compared with previous bitcoin cycles. I usually don’t agree with technical people, but they could also be right from a fundamental perspective. New buyers aren’t going to be joining when the SEC is trying to arrest people for trying to start a business. The purgatory could be us waiting on the sidelines until the rules are set. We need the American public.

Eight percent of Americans are invested in cryptocurrency, and 4% will be “joining eventually,” according to recent data. Seventeen percent American Millennials own cryptocurrency. That is absolutely nothing. The main reasoning behind why the other 83% don’t own it is because it is “too complicated”. I know people who have put large sums into the cryptocurrency market and don’t understand what distributed ledgers have to do with bitcoin. Lack of knowledge is a very silly problem to have, especially when the benefits are so apparent.

Coins can provide the security that credit cards can’t. In 2016, there were over 15 million identity thefts related to credit cards in America alone. That is one in 16 people who were affected. All of us know that these credit card numbers are constantly being bought and sold on the dark web. There is nothing for these people to take hold of if everyone is transacting with coins. You have private wallet addresses, sure. But you can’t pay for something in a private wallet address. I have said before, paying for something in Litecoin was a very pleasant experience. They gave me a QR code, I snapped it with my smartphone, and the transaction was done. No expiration dates or CVC codes being inputted into websites/swiped over and over again.

American Regulations

As it stands, the true way in America to offer a coin is through a regulation D offering. Regulation D offerings cannot be listed on crypto exchanges, and accredited investors must only exchange it with other accredited investors. The Regulation D offering legal fees range in the 6 Figures (priced in USD). This is called a barrier to entry. Millennials have not had access to high paying jobs yet, as only 16% have saved more than $100,000 in some capacity. They aren’t going to blow it all on an ICO regulation fee.

This is what led me to see how drastically different other countries were handling blockchain technology and its use cases. My first stop in Singapore was refreshing! They were actively trying to encourage blockchain in their financial services sector through federal incentive programs (ITMs). With a population of roughly 5 million, they have the ability to adapt to change very quickly. Their prime minister is close to holding a weekly talk show on the subject. In my opinion, this country would be very hard to beat in terms of favorable conditions for cryptocurrency investors and investments.

My next stop is Switzerland. The country that many have considered a haven for all things banking and discretion, Switzerland has been the trusted holder of valuable things for hundreds of years. Their history in global banking is what makes them such an interesting choice for an ICO. As a politically neutral country, they have the ability to connect many financial pieces that other countries are too emotional to do. Cryptocurrency seems to be flourishing within Switzerland, giving rise to the first Crypto Valley.


The first modern Swiss banks were established in 1741 to manage the wealth of Swiss mercenaries (fought for foreign armies for pay) and merchants. Some of the banks are still recognizable on hedge fund DDQs – Lombard Odier (1796) and Pictet Group (1805).

Today, the banking industry accounts for 11.6% of GDP, and employs over 100,000 people both domestically and abroad. It is estimated in 2016 the Swiss banking sector managed over $6 trillion dollars in a variety of different account types and instruments. In 2007, that figure was $2.7 trillion – a record in those days. Countries around the world rely on Switzerland so much, they decided to make it all of their hubs. The Bank of International Settlements acts as the conduit between all member central banks. It was founded and headquartered in Basel, Switzerland.

The country’s formal relationship with cryptocurrency began in 2013 and has since evolved into a set of ICO rules that were provided to us 2/2018 by FINMA, the regulatory watchdog of Switzerland. Blockchain has shown to be of great interest to the country, as there are plenty of things that I am sure they would like to enhance about their banking and transaction processes with an AUM of over $6 trillion.

Legal Rules

Banking Law of 1934

The law that made everyone love Switzerland was passed in 1934. These laws made it a criminal act to reveal the name of a bank account holder. The bank accounts are numbered, and they reserve the right never to reveal the identity of an account holder to tax authorities or foreign regulators. Also conveniently in Swiss law is the difference between tax evasion versus tax fraud. To put it simply, they believed the former was tolerable.

This law was challenged in 2007 after whistle blower Bradley Birkenfeld outlined just how large Switzerland’s underground economy was becoming. His report showed the UBS was actively soliciting tax evasion strategies to American clients, even going as far as bringing encrypted computers into the country.

The aftermath caused Switzerland to make the unprecedented decision to provide documentation via UBS of thousands of tax evaders from the United States. Over time, the G20 countries led the charge to demand treaties to be signed with Switzerland to cooperate with tax regulators, and to abolish the differences between tax evasion and fraud. The United States eventually left the final blow for themselves, in which they forced a new Swiss law in 2014 to make bankers work with tax authorities according to Foreign Account Compliance Act.

The regulatory body that was born out of debate was the Organization for Economic Co-operation and Development (OECD). In their Mission Statement they encourage “soft laws,” but treaties may be necessary. Clearly, that was the case for the Swiss. Now the focus has shifted to the new place for foreigners to take their money and hide it: Singapore. That will be wishful thinking, as Singapore’s response to the global community was to enhance security measures to protect client identities, not limit it. Overall, the global game of hide and seek continues.



This is eerily similar to MAS in Singapore. Enacted in 2007, FINMA merged all financial regulation under one roof to provide a unified front for the entire industry within the country. Because UBS and Credit Suisse are so vital to the country’s economy, they have dedicated teams working with each company to ensure there is an open dialogue between the government to resolve issues immediately. The trend with these crypto-friendly countries is they have one single regulatory body.

An example of their nimble structure was in the UBS tax evasion scandal. FIMMA was entrusted by the Swiss government to be the intermediary between UBS and the US Government. They dictated the terms of providing names of US citizen tax evaders. FINMA was eventually halted by a Swiss administrative court from releasing all names, but this tale is for future reference on just how much power they have within the country to dictate outcomes.

The U.S. has more than five regulatory bodies, all of which need funding and a seat at the table. With such a rapid development like cryptocurrency, I am always looking at how many agencies have power over it. The FBI shut down Mt. Gox, the SEC has handed out subpoenas to ICOs and Hedge Funds, and the IRS has gone after Coinbase. I could keep going. Each one needs their head on a stick to bring back for the meeting on budgets for the next year. Those heads on a stick are presented to people who have been running campaigns on bank money since the start of their careers, clearly this system isn’t going to produce innovative financial infrastructures before countries like Singapore and Switzerland. 


The SRO who seems to be taking the lead on cryptocurrency within the country. They were established in 1998 in Zug to oversee and educate anti-money laundering practices within the country. Read the following for more:

“In addition, since 2009 the VQF has also exercised the function of an Industry Organisation for Asset Managers (BOVV) with professional rules of conduct officially recognised by FINMA. As such, the VQF contributes towards protecting and strengthening the interests of financial intermediaries and their investors, as well as the interests of Switzerland as a financial centre.”

Their role changed in 2009, now gaining the ability to oversee and regulate financial intermediaries and their investors. The laws were almost designed for blockchain and ICO regulation. According to FINMA rules, you must either be under their direct supervision, or an SRO’s. This SRO seems to be very crypto-friendly. Their main concern is Anti Money Laundering, and other than that they are not designed to intervene.

Government Timeline



Niklas Nikolajsen founded Bitcoin Suisse AG, a bank, wealth manager, and service provider for the cryptocurrency community within the country. Based out of Zug, Switzerland, Bitcoin Suisse is the first company regulated under VQF. This was an unprecedented decision by the SRO to allow digital asset banking to be conducted in the country, especially when you take into account the immaturity of the market at the time. Bitcoin Suisse also had a network of ATMs that were within Zurich, but remained offline until full government approval (ATMs were approved by FINMA).


The government of Switzerland considered adding bitcoin to its list of foreign currencies allowed to be transacted within the country. This would ensure Bitcoin Suisse’s perpetual existence within the country, along with giving the government powers to regulate it as such.



In response to the postulates (requests for information) from parliament, the Swiss Federal Council stated that virtual currencies are “not in a legal vacuum” and their regulation was not needed at this time. To me, this was an even better answer than what the pro-bitcoin people were hoping for. The government was going to allow this all to pan out before definitions and labels


Franz Gruter, a Swiss Parliament official, filed multiple motions to change the definition of a bank to make it easier for cryptocurrency companies to do business. His main point of contact was Xapo (Wallet provider) CEO Wences Cesares, who was working with regulators on moving his business to the country. For half of 2015, Gruter kept his motions live. This was in annoyance of the government, who repeatedly told him they were not interested in making such large changes.

In June, Cesares and Gruter were approached by FINMA personnel who told them that they would soon be releasing regulations that were designed to open up the barriers to entry for blockchain company operations. Gruter rescinded his motions.

FINMA did not disappoint. They began to offer “fin-tech licenses” to businesses, with capital requirements of $300,000 to remain within compliance. The rules of Fin-tech licenses? Here is FINMA’s response:

“Leaving institutions free to implement the requirements in a way that takes account of their differing business models and of the particular risks associated with them.”

Couldn’t get more free and open than that, can you?


The local government in Zug, Switzerland proved to be the first city that wanted in on the revenue that blockchain companies were beginning to produce. In an effort to appeal to the nature of a “de-centralized” utopia, they began to accept up to 200 CHF in Bitcoin to pay for government services. There were only 10-15 transactions within the year, but this was the marketing piece that Zug needed early on to attract talent.

CODE is Born

Centrally Organized Distributed Entity, or CODE, was created by a consortium of blockchain professionals now living in Switzerland. The focus was to try to create a legally complaint ICO framework that FINMA/VQF would approve as a legal way to operate. The Ethereum Foundation, Consensys Project, and Zug law firm MME were the co-authors. By the end of 2016, there were 12 projects using the CODE framework to operate their blockchain companies in Switzerland.


Crypto Valley Assocation

The same folks who created CODE wanted to formalize it. This consortium of cryptocurrency and blockchain professionals were getting country-wide support from FINMA, VQF, the Swiss Government, and the many different entrepreneurs now working within their framework. The result was the Crypto Valley Association. Their website describes the launch in the following terms:

“In January 2017 the Crypto Valley Association was established as a professional organization to coordinate, accelerate, and scale the further development of Crypto Valley into the world’s best ecosystem for crypto technologies and businesses. The founding members included Bitcoin Suisse, Bussmann Advisory, iprotus, Lucerne University of Applied Sciences and Arts, Luxoft, Monetas, and Thomson Reuters.”

The Swiss incumbents were able to create something very quickly that the government accepted. This association would be the conduit between the blockchain community and government officials that were trying to regulate them. This does NOT exist in any other country, especially in this type of format. The Swiss listen to their citizens. They want to help.

Personal Taxes

The government clarified once again that they would be joining Spain in saying that Bitcoin is not subject to VAT. The opinion of accountants in December 2017 is that all cryptocurrencies would not be subject to capital gains, but they would also not be able to report losses as well. The government still deemed it to be a reportable asset on tax bills each year. American taxation is still supposed to be charged at full capital gains rates.



With more than 500 individual and corporate partners apart of CVA, it was time to upgrade CODE ICO Procedures into something more formal. In January 2018, CVA produced the updated code of conduct for all Swiss cryptocurrency and blockchain companies. Although not explicitly said, this was approved FINMA, who has been working with CVA exclusively on regulation. The following quote from the Crypto Valley Association provides more:

“The Code calls on all organizations running an ICO to be fully transparent about all details pertaining to the process. Importantly, these details should be disclosed in a manner that can be easily understood even by those that are not technologically sophisticated. This includes being clear about how funds raised are intended to be used and how the token will function, as well as providing a clear risk assessment for the underlying technology.”

This is the widely accepted definition of a utility token. They want to make sure KYC and AML procedures are bank-level quality, but they are widely accepting global crowdfunding. If this code of conduct remains, it will be one of the most liberal interpretations of digital currency, especially with no capital gains taxes in the secondary market!


When any country like the U.S. begins to crack down on cryptocurrency, it prompts all of the other countries to re-evaluate their positions. One Swiss Finance Minister even said “I am just waiting for Washington to call Bern and ask what the hell we are doing in Zug.” The CVA has remained strong, and the government has not tried to disrupt the framework that they are building alongside regulators.

In February, FINMA came out with their own ICO guidance for companies that were interested in starting in the country. Still having an autonomous feel, the agency defined three different tokens, which are as follows:

  • Payment tokens are synonymous with cryptocurrencies and have no further functions or links to other development projects. Tokens may in some cases only develop the necessary functionality and become accepted as a means of payment over a period of time.
  • Utility tokens are tokens which are intended to provide digital access to an application or service.
  • Asset tokens represent assets such as participations in real physical underlyings, companies, or earnings streams, or an entitlement to dividends or interest payments. In terms of their economic function, the tokens are analogous to equities, bonds or derivatives.

In true Swiss fashion, FINMA let the door open just like its difference between “Tax Fraud” and “Tax Evasion.” They wanted utility tokens to still have a chance to be offered, but also needed to differentiate between coins that were blatantly either tied to hard assets or only for means of payment.


Swiss regulators have been doing cryptocurrency related work for years now. Each industry within the country has FINMA as its parent, but also has the freedom to work under direct guidance of an SRO that wants them to make money. VQF AND CVA are the two main contributors to policy in the country, and I can only hope that remains. These people aren’t trying to create a decentralized world filled with Monero and money laundering. They are just trying to conduct their businesses to serve the needs of a gigantic population struggling to find a home.

The differences between Switzerland and Singapore are surprisingly pretty large. MAS is not of the same level of intimacy as VQF. The SRO is literally located in Zug, and their indirect job is to keep the crypto guys happy. I like the level of care Swiss authorities have put into not only their regulation, but their dialogue. The 20 year-old genius from Russia, Vitalik Buterin, was immediately welcomed into the country via the Ethereum Foundation, and given an opportunity to give his opinion on how token offerings ought to be conducted. That type of outreach is not common, especially during blockchain infancy in 2014.

If I had to choose between the two, I would choose Singapore if I was not living there, and Switzerland if I was. Singapore just recently upgraded their account holder secrecy laws, and their ICO structure is purposely free-wheeling. They only care about AML and KYC. It seems as if Switzerland is being forced to regulate incrementally more, as their relationship with the United States is a crucial one.

On the other side of the coin (no pun intended), Switzerland’s infrastructure is designed to be resilient, and the amount of support you would get in a community like Zug is like nothing Singapore can offer right now. This isn’t just a meet-up group at a high end hotel; CVA is a quasi-regulatory body headed by the same people who started the blockchain commerce boom. It is an awfully good group to be close to during your design and implementation process.

This is not a recommendation to buy or sell cryptocurrency. Market looks like crap right now anyway. Please be safe, and always be on the lookout for government announcements. These are what is really affecting the market right now, and it is best to be prepared. Best of luck- @raijincrypto.

Featured image courtesy of Shutterstock.

Mythological God of Lightning. Cryptocurrency/Blockchain writer, evangelist, and friend. May the odds be ever in our favor.