To give you a better insight into Switzerland's legal stance on virtual currency businesses and their operations, we've listed below a number of different business models that have been approved to operate and are therefore approved by FINMA or as an SRO. In basic terms – businesses which don't require a banking license.
Bitcoin-focused ATM businesses
One of the first Bitcoin-based business models in Switzerland was Bitcoin Suisse. The company established an ATM network exclusively for bitcoin.
Legal basis: The Bitcoin Suisse model must be regulated by either FINMA or SRO as there are funds being transferred through the service, and the business doesn't hold any of their client's funds. This, in turn, means there's no requirement to hold a client balance.
Bitcoin and virtual currency exchange business structures
There are countless virtual currency exchanges in operation in Switzerland that are operating as a business that simply swaps bitcoin or other currencies for another currency.
Legal basis: This business will be required to operate under a form of FINMA or SRO supervision as the businesses aren't required to physically hold and manage client funds.
The basic crypto wallet business structure
The first crypto wallet company approved and launched in Switzerland was US cryptocurrency wallet company XAPO. The company was the first in the country to receive complete FINMA approval to operate in the cryptocurrency space under the regulation by FINMA/SRO as an 'Other Financial Intermediary' business.
Though XAPO did take almost 2 years of back and forth communication with FINMA before being approved to begin operation. The reason behind the lengthy process was determining an answer to the question: Will XAPO hold their client's virtual funds?
Do virtual currency wallets actually hold funds?
As regulation by FINMA requires that cryptocurrencies be treated exactly the same as all other currencies, it is also required that crypt wallets hold no currency for later use by their clients. In the event a Wallet does hold these crypt funds, then a bank license will be required.
This decision was determined over 2 years of discussion and debate by FINMA and other advisory branches because of XAPO's planned emergence in Switzerland.
How did FINMA allow crypto wallets to operate in Switzerland as an SRO?
The complexities of virtual currencies that use the blockchain are what allowed FINMA to approve the launch of crypto wallets without needing them to obtain a banking license. The main factor with the approval rests on the fact that the wallets do no actually store the coins within, they simply store your information including the balance and other information – the coins themselves are stored on the blockchain.
The wallet is solely used by clients as a means of storing their blockchain keys for access to their currencies. It's similar in a way to using a USB or hard drive to store alias files that are stored in the cloud – there is no file on the USB or hard drive, but it opens up access to the cloud files.
Legal basis: The crypto wallet is required to operate under FINMA or SRO supervision. This is down to the fact that there are no funds in the wallet and that there are no intrinsic currencies under the ownership of the wallet company, it all remains on the blockchain. All of the above generally outlines that crypto businesses in Switzerland are to follow the exact same laws and operational business models as other financial businesses. This is also FINMA's stance on companies involved with Bitcoin in Switzerland when operating as a business. We have a startup-friendly informative brochure available for download if you want to learn more about how we can help you launch a crypto business in Switzerland.