The Swiss Federal Council plans to remove entry barriers for innovative financial services provider (fintechs) by creating a room in which fintechs can test new business models without being subject to FINMA supervision and by introduction a new fintech license. According to a media release, the Federal Council instructed the Federal Department of Finance to prepare draft legislation until early 2017.
Under the regulatory framework currently in place in Switzerland the same regulations apply to digital currencies and payment systems, crowdfunding and -lending and digital asset management services as for any other financial services. Depending on its business model, a fintech may therefore be subject to the licensing requirements for banks, securities dealers, collective investment schemes, or insurance undertakings. If the business model includes the acceptance or the transfer or investment of foreign assets, AML regulations also apply. In particular prudential regulations have often proved to be insurmountable.
- Introduction of a license-free innovation area (“sandbox”): A fintech may test new business models if the total value of deposits accepted from the public does not exceed CHF 1 million. Activities within the sandbox will not be subject to authorization or supervision by FINMA, but the fintech must disclose that it is acting within a sandbox. AML regulations still apply.
- Introduction of a new fintech licence granted by FINMA: The new fintech license will apply to institutions accepting deposits from the public without extending credit and are therefore not engaged in maturity transformation. Such fintechs will not need to join the depositor protection scheme. Deposits accepted by providers with a fintech licence may not exceed CHF 100 million; FINMA may authorize higher thresholds if the protection of individual clients is guaranteed. Minimum capital under the fintech license will be 5% of deposits with a minimum of CHF 300,000.
- Extension of banking act carve-outs: Finally, the Federal Council plans to expand carve outs under Art. 5(3)(c) Banking Ordinance. Under this “transaction account exception” money in a transaction account of securities dealers, precious metal traders, asset managers or similar firms that solely serve the purpose of the settlement of client transactions and on which no interest is paid do not qualify as deposits. Under current FINMA regulation, this exception only applied if the monies are held for less than seven days. The Federal Council now wishes to extend this timeframe to 60 days.
The Federal Departement of Finance was commissioned to prepare a draft act until early 2017. Both the sandbox and the fintech license will require federal acts to be amended and approved by the Federal Parliament whereas the expansion of the Banking Act carve outs can be implemented by amending the Banking Ordinance which is a competence of the Federal Council. Moreover, the FDF was commissioned to review further market entry barriers, including barriers resulting from non prudential regulation. By way of example, the Federal Council mentions the legal treatment of virtual currencies and assets.