The Swiss Bankers Association published guidelines Friday for cryptocurrency based companies. Here, bitcoins are seen in an illustration...
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| The Swiss Bankers Association published guidelines Friday for cryptocurrency based companies. Here, bitcoins are seen in an illustration picture taken at La Maison du Bitcoin in Paris, May 27, 2015. Photo: REUTERS/Benoit Tessier |
By Ranjitha Shastry, International Business Times
The Swiss Bankers Association (SBA), a professional organization of Swiss financial institutions, Friday published guidelines directed at financial institutions that intend to collaborate with cryptocurrencies and distributed ledger technology businesses.
The SBA said it welcomed the increased demand of blockchain companies in Switzerland, and took a positive stand because it boosted the "Switzerland’s attractiveness as a financial center."
"Within the context of its priorities, the SBA promotes and supports an innovation-friendly environment in the digitalization arena. This also includes promoting conditions that support the sustainable growth of companies involved in blockchain technology," SBA's statement said.
Similar to regulators in other countries — like the United States, the United Kingdom and India — SBA also noted the risks and skepticism behind cryptocurrency's underlying technology, blockchain, and emphasized the potential for money laundering as a significant problem. SBA wants, with the new guidelines, to bring blockchain regulations at par with that of traditional banks' legal framework (like rules for opening accounts) to make the process simpler and to reduce the associated risk.
"Switzerland has strict laws and due diligence requirements in place governing financial transactions. Banks must, therefore, carry out careful checks when opening an account. The SBA had recognized the challenges of opening accounts for blockchain companies at an early stage and communicated its members' interests and unresolved questions to various authorities," the press release read.
The SBA published the guidelines with the help of an internal working group, involving member banks and an independent, government-supported association called Crypto Valley Association, established to build the blockchain and cryptographic technologies.
These two independent bodies worked on detailed n requirements and conditions that could possibly be applied when opening accounts for companies with links to blockchain and digital fundraisers known as initial coin offerings (ICOs).
SBA strategic adviser Adrian Schatzmann said the regulations were drafted with a hope to establish a base for both traditional banks and "innovative startups" to have a simpler process when it comes to the opening accounts, as well as to and facilitate discussion.
"Around 530 blockchain startups have settled in Switzerland’s Crypto Valley hub around Zurich and Zug," Oliver Bussmann, head of Crypto Valley Association, told Reuters.
Another important reasonthat prompted the framing of the new guidelines is that only 250 of Switzerland’s banks allowed companies to deposit the cash equivalent of cryptocurrencies raised in ICOs. Out of the 250, two withdrew their services in 2017, and Zurich Cantonal bank, the fourth largest Swiss bank, closed the accounts of more than 20 companies associated with cryptocurrencies.
This downfall in the Swisstzerland banking sector was because some companies that launched ICOs did not carry out online anti-money laundering checks on their contributors, which indirectly meant the banks found themselves running foul of money-laundering rules.
The new guidelines clearly addressed this issue under two sections for blockchain firms, one each for firms with ICOs and for those without. For companies whose ICOs are backed by cryptocurrencies, higher and additional requirements would be imposed, whether or not they are subjected to the Anti-Money Laundering Act.
The guidelines also recommend the ICO organizer should apply the relevant Swiss know-your-customer standards on the origin of funds and money laundering when accepting cryptocurrencies under an ICO.
"It is also proposed that the acceptance of cryptocurrencies under ICOs should be treated as a minimum in the same way as a cash transaction," the press release read.
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