Crypto License in Switzerland

There are several advantages to obtaining a crypto license in this jurisdiction:

Predictable regulatory environment
Cryptocurrency exchanges can operate in a stable regulatory environment secured by FINMA, ensuring that there are no expected legislative changes shortly.

Cryptocurrency-friendly banking sector
Switzerland boasts a cryptocurrency-friendly banking sector, where, according to recent surveys, more than half of banks are ready to offer digital asset services in the coming years.

Strengthening the company’s image
Operating under a license in Switzerland strengthens the company’s global reputation, meeting Switzerland’s high standards of financial stability and innovation.

Attractive taxation system
Switzerland offers a tiered taxation system where crypto exchanges can choose the most favorable cantonal tax rates ranging from 11.9% to 21%. Switzerland also has approximately 100 international double tax treaties that allow taxpayers to protect their foreign-derived income from double taxation. In addition, companies with foreign business may be eligible for tax incentives at cantonal and municipal levels if certain conditions are met.

An influential blockchain community
Switzerland is home to a vibrant blockchain community, with Crypto Valley serving as a hub for leading cryptocurrency companies (including AllianceBlock, Bancor, and Cardano), fostering collaboration and innovation.

Support for the fintech sector
The Swiss government strategically supports financial technology companies, creating a favorable environment for innovation and development.

Diversity of trading opportunities
Under a cryptocurrency exchange license in Switzerland, companies can offer a wide range of trading pairs and services, making the platform more attractive to traders looking for a variety of investment opportunities.

The list of requirements for obtaining a crypto business license depends on the type of license and the nature of the crypto business activity, but it includes some general provisions:

Establishment of the company
Founding a company (e.g., a joint stock company, a limited liability company, or a corporation with unlimited partners) in Switzerland.

Detailed business plan
Submission of a detailed business plan describing goals, objectives, target market, products, services, risks, governance, and compliance.

Adequate capital
The availability of sufficient capital to cover operational and financial risks (minimum CHF 20,000, about $22,077).

Robust organizational structure
Implementation of a robust organizational structure that ensures proper governance, oversight, control, and reporting.

Registered office
Having a registered office in Switzerland.

Resident manager
Appointment of at least one manager who is resident in Switzerland.

AML Control Officer (Compliance Officer)
Having a risk management officer who is resident in Switzerland.

Effective risk management policy
Development and implementation of an effective risk management policy.

Internal controls and audit functions
Development of adequate internal controls and audit procedures.

Compliance with applicable laws and regulations
Ensuring compliance with applicable laws and regulations.

Cooperation with FINMA and authorities
Cryptocurrency businesses must also cooperate with FINMA and other Swiss authorities to comply with regulatory standards and compliance requirements.

In Switzerland, there are several types of licenses and permits for legal cryptocurrency activities that may be required depending on the nature of the business activity.

The main types of FINMA licenses that may be required for a cryptocurrency business:

• fintech license – one of the most sought-after license types for financial transactions and intermediation, which allows you to accept deposits up to CHF 100 million (approximately USD 113 million) without investment or interest payments, including cryptocurrency transactions;
• financial services license (bank license) – Swiss banks and financial institutions must obtain a banking license (or similar authorization) to operate and provide financial services, including cryptocurrency-related services;
• securities dealer license – required for financial intermediaries that engage in securities trading, brokerage or securities transactions, including securities tokens;
• payment services license – required for companies that provide payment services, including the issuance of electronic money or payment processing;
• investment fund license – allows managing assets of a collective investment fund on behalf of clients.

If your cryptocurrency activities fall under any of the regulated categories, you will need to apply for one or more licenses before you start operating in Switzerland.

Examples of when your cryptocurrency company may need a license are:

• the movement of client assets into your company’s accounts;
• the number of clients whose crypto assets your company has accepted exceeds 20;
• your company manages client assets in collective investment funds.

If a license is not required, a cryptocurrency business may be registered with FINMA as a self-regulatory organization (SRO) and will also be required to comply with the relevant administrative requirements.

As mentioned above, all cryptocurrency and blockchain projects in this jurisdiction are subject to regulation by FINMA, which develops guidelines for different types of cryptocurrency companies to ensure their compliance with applicable laws. FINMA also issues licenses for cryptocurrency activities and monitors compliance with financial markets laws and anti-money laundering regulations. The legal framework in this area includes:

• Anti-Money Laundering Act (AMLA);
• The Anti-Money Laundering Ordinance;
• Anti-Money Laundering Ordinance (AMLO-FINMA).

Under the AMLA, cryptocurrency exchange operators, brokers, and custodians are considered financial intermediaries and are subject to appropriate regulation. Their activities require registration with FINMA and strict compliance with due diligence and reporting obligations.

Since 2018, FINMA has been cooperating with the Swiss State Secretariat for International Finance (SIF). The cooperation aims to develop blockchain projects and amend current legislation. However, the country does not yet have a specific law on cryptocurrencies, so the existing legal framework is used to regulate various aspects of the cryptocurrency industry.

A key role in the regulation of cryptocurrency activities in Switzerland is played by the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (DLT). The DLT Act covers a wide range of aspects:

• licensing – defines the requirements for obtaining a license to conduct cryptocurrency activities, guaranteeing the legitimacy and reliability of market participants;
• trading – establishes rules for trading cryptocurrencies, protecting investors’ interests and ensuring market stability;
• anti-money laundering – implements strict measures to combat money laundering and terrorist financing, making Switzerland a safe jurisdiction;
• financial infrastructure – defines the financial infrastructure for cryptocurrency trading, creating an efficient and reliable ecosystem;
• customer protection – establishes procedures in case of bankruptcy of cryptocurrency companies, protecting the interests of customers.

According to the DLT Act and the Financial Market Infrastructure Act, the Swiss National Bank (SNB) is responsible for ensuring the stability of the financial market infrastructure. The SNB strictly supervises the activities of financial market entities, including:

• DLT trading platforms (platforms where cryptocurrencies are exchanged);
• securities storage and accounting systems;
• services providing payment processing.

At the request of the SNB, each regulated company is obliged to provide all necessary information and documentation to assess the risks that may jeopardize the stability of the financial market.

Cryptocurrency projects that issue tokens through ICOs or ITOs are subject to different regulatory rules. Switzerland recognizes and regulates the following types of crypto-tokens:

1. Payment tokens – used as electronic means of payment to transfer funds.
2. Asset-backed tokens – backed by tangible assets and often issued as part of STOs (security token offerings) to attract investments (debt tokens, equity tokens, participation tokens).
3. Service tokens – provide digital access to a system or service, usually available on a specific DLT platform (unless classified as securities, no license is required).

Depending on the type of tokens used, legislation relating to securities, banking, and collective investment may also apply.

It is important to note that even if payment tokens are not recognized as legal tender, FINMA does not classify them as securities, as their primary purpose is to be used as a means of payment.

The Swiss tax system is organized according to a multi-level structure. Tax administration functions are distributed between:

• Swiss Confederation;
• cantons;
• municipalities.

While federal tax rates generally remain stable, cantonal tax rates are set annually and published on the official websites of each canton. While taxation systems may vary from region to region, the tax year generally coincides with the fiscal year of reporting.

The tax regime for cryptocurrency companies in Switzerland depends on the nature and purpose of their economic activity. Unlike conventional money, most cryptocurrencies are classified as assets in Switzerland. Accordingly, most cryptocurrencies are subject to the asset tax law.

Tax residency status is also relevant. Individuals who are tax residents are liable to pay taxes on income earned anywhere in the world. While non-resident companies only pay taxes on income earned in Switzerland.

Most cryptocurrency companies are liable to pay the following taxes on all three levels:

• personal income tax – 35%;
• corporate income tax (CIT) – at the federal level the rate is 8.5% of profit including tax deductions, at the cantonal level it can vary from 11.9% to 21%;
• Value Added Tax – 7.7%;
• social security contributions – 0.5% to 5.3%;
• stamp duty – 1%;
• capital gains tax – from 0.001% to 0.5%.

Due to differences in tax systems between different cantons and municipalities, Canton and municipal tax rates can vary significantly.

It is important to consider the following:

• capital raised through an initial coin offering (ICO) is not considered income to the issuer;
• the issuance of new tokens does not give rise to an obligation to pay capital gains tax;
• if the transfer of payment tokens is not treated as a trade transaction, they may be treated as securities for tax purposes.

Transactions such as the exchange and use of payment tokens are exempt from value-added tax (VAT). This is because this category of cryptocurrencies is recognized as a means of payment and is therefore treated similarly to traditional currency. All commissions and fees associated with such transactions are considered financial service fees and are not subject to VAT.

Switzerland has approximately 100 international double tax treaties that allow taxpayers to protect their foreign income from double taxation. In addition, there are tax incentives for international businesses in this jurisdiction. If certain conditions are met, such companies can receive reduced income tax rates (from 7.83% to 11%) for profits derived from foreign sources.