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Switzerland is planning to lighten up the regulation for fintech companies providing disruptive services like crowdfunding and crowdlending, and lower the entry requirements.
According to a document published by the country’s finance ministry – the Federal Department of Finance (FDF), the government is intending to lower the barriers for entry to the fintech sector, which, as defined by the document includes mobile payments, blockchain and cryptocurrencies and P2P lending. This, however, does not mean that the government is intending to deregulate the sector, but rather to make the rules more clear and simple.
In the document the government notes that according to the current regulation the players at the financial markets, including the fintech firms, the blockchain technologies, including exchanges, ATM and wallet providers for cryptocurrencies are regulated by the banking and anti-money laundering laws. The tight regulations and requirements set in those laws, however, are a considerable barrier to innovative fintech firms that want to carry out only certain elements of banking.
So, the proposed simpler regulation should reduce the identified barriers to market access for providers in the area of innovative financial technologies and increase overall legal certainty for the affected financial service providers.
One of the planned amendments includes extension of the timeframe for settlement accounts. Under the current rules the Swiss financial markets watchdog FINMA, has set a rule that client accounts for settlement of trading activities that do not pay an interest and have a seven-day timeframe, are not considered deposits. Now the government proposes this period to be extended to 60 days, in order to ease the work of the crowdfunding platforms, as a crowdfunding campaign usually lasts much longer than a week and the seven days timeframe is too short for business models that temporarily hold money on own accounts.
Another proposed step is the creation of a “regulatory sandbox” where an innovative company can accept public funds of up to CHF 1 million from more than 20 investors/depositors, without the supervision of FINMA. “A moderate expansion of the existing authorization-exempt activity would offer market entrants the possibility to check the conceptual and economic efficiency of their business model within a limited framework before having to decide on obtaining authorization, for example,” the government notes.
The third proposal is the introduction of a new fintech license with less stringent requirement granted by FINMA. It is intended for companies who do not operate in the lending business.
The Swiss crowdfunding market is still relatively small, especially in comparison to that of the UK. According to estimates of CrowdfuningHub, in 2014 it has a turnover of around 14.4 million euro with expectations of doubling in 2015. According to the same source, in Switzerland operate around 40 lending platforms, with the foreign IndieGoGo and Kickstarter being the most active.