Swiss Regulators Engage Banks to Prevent Exodus of Cryptocurrency Ventures
Switzerland’s financial market supervisor, FINMA held discussions with the country’s bankers’ association and the Swiss National Bank (SNB), on how to improve cryptocurrency ventures’ access to banks. This is in response to the exit by some crypto-enterprises that are opting to move their business to other territories.
Switzerland the Crypto-Nation
According to Reuters, Swiss regulators have been taking steps to maintain the country’s reputation as a cryptocurrency friendly jurisdiction and to prevent the departure of virtual currency projects that have traditionally had limited access to the formal financial system.
Over the years Switzerland has cultivated a reputation as one of the more cordial countries for cryptocurrency entities willing to set up shop or conduct ICOs.
In addition to having an aggregation of digital currency startups in a region recognized as Crypto Valley, the country has also expressed its support of cryptocurrencies as witnessed by the sentiments shared by the Swiss Economics Minister:
Now we have arrived at an innovative moment in the financial world. Cryptocurrencies are part of the fourth industrial revolution. We look at what possibilities can arise from it. For my part, I try to identify the opportunities, the risks and the opportunities, and decide: Is this a future business with future jobs or is it not? That’s why I support the circles that deal with it.
Even large players like Bitfinex have given Switzerland a stamp of approval of sorts by considering the country as its permanent residence.
All of these factors have contributed to the crypto-nation tag that Switzerland is aspiring for. However, the real issue lies with an acceptance by the country’s bankers.
Limited Acceptance from the Financial System
Only a small number of Swiss banks have allowed cryptocurrency ventures to do business with them making it difficult for such projects to be domiciled in the country. The number of institutions that are warm to digital currency focused business is also shrinking.
At least two Swiss banks have reportedly withdrawn services to cryptocurrency projects and groups, further reducing the already limited pool of institutions that handle basic, essential services like accepting deposits. This has triggered the exodus that the country is now facing.
Some cryptocurrency entities that want to carry out ICOs have resorted to setting up bank accounts in other territories like Liechtenstein and Gibraltar where they have access to more traditional banking services and are able to easily access their funds.FIN
At the same time, the banks in Switzerland that still accept cryptocurrency deposits do so under strict conditions. These include policies to only bank with ICO companies that have KYC and AML procedures compliant with Swiss regulations.
Cryptocurrency companies are also asked to pay initial assessment fees of up to US$2,500 by the banks before securing their services. Faced with such conditions, cryptocurrency enterprises are exploring other options.
Solutions in Regulation & Dialogue
Swiss banks’ hands-off approach on cryptocurrency projects has largely been driven by concerns surrounding the lack of clarity on the rules and regulations that apply in the space.
Some of the stickier points have to do with fraud and money laundering – areas that have dogged projects like ICOs and are the major issues affecting the requirements for opening a bank account.
According to a statement from the Swiss Bankers Association (SBA):
Banks are currently hesitant to open business accounts for companies with particular touchpoints to ICOs and cryptocurrencies – due to risks such as fraud or money laundering.
Switzerland has been working on this, seeking solutions through dialogue and the crafting of regulatory frameworks that will add clarity to the situation.
The Swiss Finance Minister invited the SNB, SBA, and FINMA to a discussion on bank accounts for cryptocurrencies, after which the SBA set to work to compile a system of checks and conditions that could be followed when opening accounts for cryptocurrency firms.
These measures are major steps towards a solution for Switzerland’s problem with the flight of cryptocurrency businesses. Regulatory action regarding cryptocurrencies is often a slow process and the efforts being taken by the Swiss are notable.
It remains to be seen if they are enough to change bankers’ opinions on doing business with virtual currency outfits and more importantly, stop these cryptocurrency companies from leaving.
Do you think the Swiss authorities are doing enough to lure and retain cryptocurrency enterprises? Are regulatory frameworks enough to make a country a competitive destination for cryptocurrency investment? Let us know in the comments below.
Image courtesy of Shutterstock