Switzerland: Swiss Financial Market Authority (FINMA) considers Bitcoin

May 8, 2014
Switzerland is Considering Bitcoin.

Switzerland: The Swiss Financial Market Supervisory Authority, FINMA, has revised the Collective Investment Schemes Ordnance. This time it includes information and guidelines on Bitcoin. Coming from one of the most conservative and secretive financial systems in the world, this is an indication of Bitcoin’s progress.

FINMA’s role is:  “To protect creditors, investors and policy holders and ensure the smooth functioning of the financial markets. Through consistent supervision and predictable regulation, we make an important contribution to safeguarding the stability and good reputation of the Swiss financial center, and consequently to enhancing its competitiveness.”

In accordance with their role, as outlined above, FINMA recently published a paper titled: How consumers can protect themselves from financial market actors that operate without permit. FINMA  discuss the risks, that potentially lie, for consumers in its irreversibility, anonymity and volatility – These are all valid concerns. They also note that money laundering laws and banking laws might apply when running a business such as a Bitcoin exchange. This is, of course, in line with our view that Bitcoin should be treated like other currencies.


[dropcap size=small]F[/dropcap]INMA’s report identifies three concerns that they see as potentially endangering the Swiss Financial System; it seeks to inform in three areas:

  1. It wants to provide information about the approach it adopts to combat illegal and fraudulent financial intermediaries.
  2. It wants to raise awareness about key areas and the methods used by illegal financial intermediaries.
  3. It wants to urge investors to consider their purchase decisions carefully. Before making an investment, investors should fully understand the financial product in question.

FINMA is the organisation tasked with guarding the boundaries of the Swiss financial market, in this role it acts to collectively protect investors, creditors and policyholders. These are people with a responsible job; people that take their role extremely seriously. In the FINMA report, section 6.4 (page 12), they state:

“More and more goods are being bought on-line, and this development has inevitably meant online cash flows. Originally these cash flows took place via conventional channels (i.e. Credit Card companies, specialised payment services such as PayPal etc.,) but more recently so called virtual currencies (e.g. bitcoins) have been created by individuals. The trade in bitcoins takes place in a completely decentralised environment, independent of state institutions and banks. Bitcoins can be exchanged for ‘real’ currencies such as Euros or Dollars in Bitcoin exchanges.

One feature of bitcoins is that it is not possible to identify one’s trading partner. Because of this anonymity they play a special role in the black economy. Payments made using bitcoins cannot be reversed. Once the funds have been transferred, they cannot be recovered by a central authority, nor is it possible to contact the seller or hold him to account if problems arise. Furthermore, the exchange rates of virtual currencies are subject to extreme fluctuations. For these reasons, trading in bitcoins presents increased risk of fraud, money laundering, and outright loss.”

FINMA also points out that while supervisory law contains no specific provisions relating to Bitcoin, trading in bitcoins, or any other cryptocurrency may require a license, depending on the business model.  If, for example, an exchange sets up and accepts deposits from more than twenty customers, then a banking license is required. Similar rules are in place for companies trading in bitcoins.

Switzerland has been a financial hub for well over a century. The financial model in Switzerland has been held up as a model of conservative excellence. The fact that FINMA has included Bitcoin in its considerations is a step forward. Switzerland does not do things quickly; FINMA does not act rashly. Rest assured that some consideration has gone into this development.

If the Swiss Banks recognize the future that is Bitcoin then, the rest of the world will not be slow to follow.

Featured image by Shutterstock.

Last modified (UTC): May 8, 2014 09:34

PJ Delaney @P.J. Delaney@delboyir

Masters in Public Administration, Bachelors in Mgt., I live in Ireland, I have a bit of a background in Economics and lots of opinions on everything else.