Swiss regulator taking more conservative approach with crypto

FINMA has said its approach to crypto is more conservative due to comparatively high volatilities of the underlying assets.

Swiss regulator Financial Market Supervisory Authority (FINMA) says it is taking a more conservative stance on crypto investing due to “high volatilities of the underlying assets” according to a spokesperson.

 According to reports, a letter to an association representing Swiss trustees and accountants, EXPERTsuisse, states FINMA is advising a 800% risk weighting for banks crypto trading imposing a 4% cap on crypto positions as a percentage of total capital held by banks.

FINMA spokesperson Vinzenz Mathys is unable to confirm whether the contents of this letter are true. However, Mathys confirmed FINMA is choosing a more conservative approach in this area due to the comparatively high volatilities of the underlying assets.

“It should be noted, however, that certain countries are taking an even more conservative approach. We are working at international level in the Basel Committee on the development of an international standard.  We will look again at this calibration when an international consensus is reached in Basel,” added Mathys.

The Basel Committee is an influential in banking supervision and responsible for guiding banks on how much money to hold against risky assets. Over the years Swiss cantons have been attracting FinTech, blockchain, and cryptocurrency firms and start-ups, in particular to the Canton of Zug, Switzerland which has been dubbed “Crypto Valley” with a number of businesses headquartered in the remote region.

Zurich-based Falcon Private Bank with US$18 billion in assets under management is offering clients a compliant process for investing wealth generated from trading in cryptocurrencies. Falcon was approved to trade crypto by FINMA in July 2017.

Urs Fehr spokesperson from Falcon Private Bank said: “FINMA has given its consent to our offering. Regarding due diligence in the on-boarding of wealth originating from crypto assets we apply required due diligence using specific tools to analyse the transaction history of the blockchain to ensure full compliance with AML and KYC laws and regulations. Our auditor PricewaterhouseCoopers has reviewed the process.”

Fehr added: “With the introduction of blockchain asset management solutions we have responded to a demand from clients… Roughly a month later we were able to add further services.”

Legally Switzerland has classified virtual currencies as assets (property) and had relaxed regulatory burdens on and entry barriers for innovative FinTech companies listing in Switzerland.

Those who hold cryptocurrencies are also taxed at the rate determined by the tax authorities on December 31st of the fiscal year.  For example, the tax rate for bitcoins determined on December 31, 2017 by the Swiss Federal Tax Administration was CHF13,784.38 (about $14,500 and £11,282).

Fehr explained that since the beginning of 2018, Falcon Private Bank has been adding crypto services. The bank is providing blockchain asset management services to clients through an alliance with currency exchange Bitsuisse. Swiss regulatory body FINMA has approved clients can exchange and hold bitcoins through Falcon using their cash holdings.

Fehr concluded it is important to note that the bank is only offering blockchain asset management services for Falcon clients.