Fintech is currently a hot topic in many jurisdictions, particularly when it comes to facilitating innovation in that area from a regulatory perspective.
Against this backdrop, during its meeting on November 2 2016, the Swiss Federal Council pronounced itself in favour of easing the regulatory framework for fintech companies to establish Switzerland as a leading fintech hub. It also instructed the Federal Department of Finance to draw up a consultation draft with the required legislative amendments.
Lower regulatory barriers
The Swiss Federal Council has proposed the following regulatory adjustments:
Fintech licence: Fintech business models often require the handling of client funds which potentially leads to the need for a banking licence. However, the cost and effort involved in acquiring a fully-fledged banking licence most often exceed what fintech startups can afford, effectively preventing them from entering the market. In light of this, the Swiss Federal Council has proposed the introduction of a new licence type that imposes lower regulatory requirements than a fully-fledged banking licence. Under this new type of licence, service providers will be able to accept public deposits up to a total value of CHF 100 million (approx. $99.4 million) - or more in specific cases authorised by the Swiss Financial Market Supervisory Authority (Finma) - but will not be allowed to engage in commercial banking. This means that they may not invest the deposits or pay interest on them. In turn, the regulatory requirements will be significantly reduced. Notably, the licence will trigger substantially lower capital adequacy requirements than an ordinary banking licence. The required minimal capital will amount to five percent of the accepted public funds, but no less than CHF 300,000. Deposits accepted under the fintech licence will not be covered by the Swiss deposit protection system. The introduction of this fintech licence would be pioneering by international standards. Innovation sandbox: Under Swiss banking law, a licencing requirement arises to the extent that a person accepts deposits from the public on a commercial basis or holds themselves out as accepting deposits from the public. In this context, whoever (a) accepts on an ongoing basis more than 20 deposits; or (b) holds themselves out as accepting deposits from the public (even if this results in fewer than 20 deposits), is deemed to act 'on a commercial basis'. As fintech companies often...