Crypto Regulations in Switzerland 2024

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Switzerland is a highly developed European country. It is renowned for its strong economy. The country has a welcoming attitude towards financial technologies. It is one of the most crypto-friendly countries in the European continent. It was in 2016 that the country at first adopted this attitude. Since then, it has introduced several policies in order to support the growth of the blockchain and cryptocurrency sector. At present, it is a prime European destination for blockchain and cryptocurrency businesses. Switzerland is one of the few countries in the world which has a regulatory framework in order to support the use of cryptocurrencies for financial payments. Understanding the crypto regulatory framework of Switzerland is very important, as it can explain how a country can positively use the concept of regulation to achieve growth and stability. Be prepared to feel mesmerized! Ready?      

1. Crypto Regulation in Switzerland: A General Overview

In Switzerland, cryptocurrencies are categorized as an asset class. The crypto regulation in the country is overseen by the Swiss Financial Market Supervisory Authority, known as FINMA. This authority acts like a licensing and regulatory authority, basically. It offers four specific crypto licences: fintech, exchange, investment fund, and banking. It ensures that the country’s Anti-Money Laundering Act is strictly followed. Recently, the country adopted new guidelines to enhance the regulatory oversight of crypto exchanges and other digital asset services, on the basis of the recommendations of the country’s Financial Action Task Force, known as FATF. Recently, over 1,000 blockchain and crypto-based businesses established their headquarters in the country. Recently, the country made some serious attempts to improve its Web3, Blockchain and Cryptocurrency environment. Among those, the most prominent one was the introduction of the ‘Blockchain Act.’

1.1. Swiss Blockchain Act: What’s It

Known by the name, ‘Swiss Blockchain Act,’ is a set of amended laws, which provides comprehensive legal regulations for blockchain-based businesses. The act enhances investor protection by segregating crypto assets and increasing legal certainty in events such as bankruptcy. Interestingly, it reinforces the country’s principle of technology neutrality. Notably, the most important feature of the act is the creation of a new licence category for Distributed Ledger Technology-based trading systems. It even provides clarity on crypto asset taxation. 

1.2. Swiss Crypto Valley: Does It Exist?  

A few minutes before, we have been told that Switzerland is home to many crypto tycoons. Is it true? Once you listen to the story of Zug, this doubt will never arise again in your mind. Why? 

Here is the story of Zug – the Swiss Crypto Valley.  

Zug is a major hub of cryptocurrency companies. The transformation started in 2013 when Johann Gevers moved Monetas to Zug. The term ‘Crypto Valley’ was actually coined in 2014 by Mihai Alisie during Ethereum Foundation discussions. By 2017, Zug had attracted more than 40 crypto-foundations. The local government supported this growth by easing registrations, offering Bitcoin for services, and helping with visa applications. The success formula of the Zug model is the right combination of business-friendly laws, strategic location, and lower tax rates.  

2. Crypto Regulation in Switzerland: What’s New 

December 11, 2023: Lugano started accepting Bitcoin and Tether for municipal payments.

January 23, 2024: FINMA approved a retail trading platform for tokenised securities and digital assets. It expanded Taurus’ TDX platform to retail investors.

February 20, 2024: Tyr Capital Partners in Geneva faced a raid by Swiss prosecutors over allegations of criminal mismanagement.

May 16, 2024: The Swiss Federal Council proposed adopting the Crypto-Asset Reporting Framework (CARF) for better tax transparency.

May 30, 2024: At the London Blockchain Conference, the Swiss Metaverse Association unveiled its Regulatory Position Paper. It advocated for positive global metaverse regulations.  

3. Crypto Taxation Framework in Switzerland Explained 

As said earlier, Switzerland considers cryptos as assets. It is not considered as a legal tender like the Swiss Franc (CHF). Capital Gain Tax, Wealth Tax, and Income Tax are the three taxes we consider here.  

Capital Gain Taxes 

For Private Investors, profits from holdings and selling cryptocurrencies are generally tax-exempt. For Commercial Traders and Businesses where crypto trading is a primary income source, profits are subject to Capital Gain Tax (CGT) up to 7.8%, along with around 10% for old-age and survivors insurance.

Wealth Taxes 

Cryptocurrencies are subject to wealth tax if the total value of your assets exceeds the personal exemption on December 31st. 

Income Taxes

Income from cryptocurrencies, such as salary, payments, mining, staking, or airdrops, is subjected to income tax. The income is converted into Swiss Francs at the time of receipt. Switzerland’s progressive federal, canton, and municipal tax rates will apply. Income tax rates vary by location and income level.  

4. Crypto Mining in Switzerland: What You Should Know 

There is no restriction for crypto mining in Switzerland. Generally, the country treats crypto mining as income. But, different regions have different perceptions about this. For example, in Bern and Zurich, cryptocurrency mining is a self-employment option. At the same time, Lucerne and Zug don’t agree with giving a general categorisation. Instead, they prefer to go more into details and categorise a mining activity individually. As per their view, a mining activity can be a self-employment, hobby or a business. This simply means that tax implications for mining depend on where you live. Naturally, a mining activity treated as a business may have to pay more taxes than the one treated as a hobby.      

5. Timeline of Crypto Regulation Evolution in Switzerland 

2013: Johann Gevers moved his crypto start-up Monetas to Zug. It marked the formation of Crypto Valley.

2014: Zurich set up the country’s first Bitcoin ATM.

2016: Switzerland began promoting cryptocurrencies for financial payments. Zug accepted Bitcoin payment for council services. 

2016: FATF acknowledged Switzerland’s AMLA framework for preventing illegal financing.

2018: Swiss Economy Minister revealed his goal to position Switzerland as a “Crypto Nation.”

2018: FINMA released ICO Guidelines adapting financial laws to cryptocurrencies. The guidelines covered banking, securities, trading and investment schemes.

2019: FINMA’s ICO Guidelines clarified the regulatory stance on stablecoins. 

2020: Swiss Parliament passed holistic regulations for blockchain businesses.

2021: The Blockchain Act was enacted, providing a legal basis for trading cryptos.

2021: FINMA approved the first crypto fund, the Crypto Market Index Fund.

2023: FATF improved regulations for crypto oversight came into force. 

Endnote 

Switzerland stands out as a global leader in crypto regulation. The European financial superpower sets a high standard for other aspiring countries to follow. The country’s crypto regulatory framework serves as a model for how fintech can boost economic growth. The ongoing updates and improvements of the country to its existing crypto regulations reflect its strong commitment to developing the digital finance sector. Switzerland’s approach showcases how positive and progressive regulation can shape a user-friendly, as well as safe and secure, crypto environment. As it continues to lead the way, the country remains the prime example of forward-thinking regulation.  

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