Switzerland Enshrines Consistency in Fintech Regulation
In a move aimed at ensuring a consistent approach to the qualification and regulatory treatment of fintech operators and other financial institutions, Switzerland’s financial watchdog, FINMA, has introduced a range of measures to foster innovation in the country’s financial market.
Simplified Regulatory Environment
Under the new framework, fintech firms will benefit from a more streamlined regulatory environment. FINMA has established a dedicated fintech desk to interact with start-ups and revised several circulars to render them technology-neutral. The regulator has also simplified organisational requirements for small fintech companies under anti-money laundering (AML) regulations.
- More efficient interaction between fintech operators and regulators
- Technology-neutral regulation to encourage innovation
Regulatory Sandbox
To further encourage innovation, Switzerland’s government has introduced a regulatory sandbox that allows companies to test their business models without prior approval or review by the regulator. This exemption is available for deposits of up to CHF 1 million and applies to any person accepting deposits from the public or engaging in collective custody of cryptocurrencies.
- Test business models without regulatory hurdles
- Encourage innovation and experimentation
Fintech Licence Category
FINMA has also established a fintech licence category, which authorises companies to accept deposits from the public up to a maximum threshold of CHF 100 million without investing them. This licence is subject to less onerous requirements than a fully-pledged banking licence and has so far been granted to five companies.
- Less stringent requirements for fintech firms
- Increased flexibility for companies to operate in the market
DLT Trading Facilities
In addition, Switzerland’s government has introduced a new regulatory licence type for DLT trading facilities, which are defined as professionally operated venues for the multilateral trading of DLT securities. The new law also provides for the competence of FINMA to exempt small insurance undertakings with innovative business models from insurance supervision under certain conditions.
- Encourage innovation in DLT trading
- Provide regulatory clarity for fintech firms
Boosting Innovation
These measures are expected to boost innovation in Switzerland’s financial sector and ensure a consistent regulatory approach towards fintech firms, while also providing greater flexibility for these companies to operate in the market.