As the cryptocurrency world evolves, with more and more jurisdictions codifying it and ensuring that the cryptocurrency becomes the industry standard, the cryptocurrency gets a quality mark that proves that it can earn users’ trust. Over the next four years, the EU will introduce new regulations that make it possible to introduce blockchain and cryptoasset technologies in the traditional financial sector.

However, the need to obtain government approval for financial activities is currently the most important obstacle to entering the market, which also means a significant waste of time and money for new establishments – although this is not always the case. In addition, each business model requires a specific license.

Crypto organizations and authorization types
The Swiss Financial Markets Authority or FINMA regulates projects in banking, cryptography and financial technology. There are five types of financial permits in the state – licensing, recognition, licensing, approval and registration. However, fintech companies usually use only two – recognition and licensing.

Types of licenses include: permitted activities; Customization options; Jurisdictions where users can be attracted; Acceptable documents for user identification; Methods for storing customer information; Most anti-money laundering measures. Restrictions on transactions Capital requirements Frequency and method for, among other things, audits.

When choosing and applying for the right type of mandate for your business, keep in mind that this will determine your business opportunity and your level of responsibility for many years to come. At the beginning of the journey, things can seem so confusing and difficult to understand that you will feel like leaving everything to your lawyer.

However, in practice, studying this issue and starting close collaboration with specialists will help you create the most effective legal model and formulate the best strategy for development, without requiring large investments in initial legal costs, while accelerating product launches in the market. …

First step: sandbox
You can run the encryption service in the so-called FINMA sandbox. Depending on the infrastructure of the project, a startup can fully develop a product, accept customer money, sell financial services, issue bank cards and can perform many other actions even before you get permission.

Fintech companies that meet the following requirements can go into sandbox mode:

The total amount of assets received from customers does not exceed CHF 1 million or USD 1.1 million.
The money received is not invested, interest is not paid (in this case you can use the company’s own assets, earn them and, if your model ensures this, pay interest to customers).
Investors must be informed in advance that FINMA does not supervise fintech companies and that the security of deposit funds is not guaranteed by insurance (this rule applies to all types of delegations, except banks, where FINMA’s supervision and deposit insurance are mandatory.).
If a start-up meets these requirements, the company can do so temporarily without the approval of the authorities. It is necessary to prepare a legal notice on this subject, with the help of professional lawyers.

However, when the company exceeds the sandbox restrictions, the issue of obtaining permission from FINMA will be a cornerstone in the further development of fintech and will be one of the critical factors in accelerating the commercial launch of the product.

Second step: self-organizing organizations
Most start-ups do not have the millions of Swiss francs required to obtain a full FINMA banking license, including minimum capital requirements. In this case, you can join one of the 11 self-regulatory organizations or SROs operating in Switzerland and obtain brokerage status.

A financial intermediary requires approval from the authorities for each type of activity individually, and not for everyone at the same time, as is the case with a bank. Services can only be implemented as part of the advertised structure of an authorized product. If the product structure changes, you must obtain approval again from the relevant FINMA or SRO.

SRO members can perform more than 10 types of activities. These include asset management, foreign exchange transactions and transfers, as well as insurance and new payment methods, including cryptocurrency transactions, among others. Businesses can offer services to customers in Switzerland and abroad, as well as companies and individuals.

Joining an SRO costs several thousand Swiss francs, which includes a number of annual fees, audit fees, etc. For example, in our case with 60,000 users, the total cost of an SRO is approximately CHF 100,000.

Source: CoinTelegraph

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