Fintech Outlook 2018

Author:Dr. Daniel Flühmann and Peter Hsu
Profession:Bar & Karrer

Switzerland has long established itself as an attractive base for cutting-edge technological innovators, notably in ancial sector and related areas. Among other factors, this development has been supported by the Swiss legal and regulatory landscape. Swiss financial regulation in particular is characteristically principle-based rather than rule-based, allowing it to cope well with new, original business models.

Furthermore, the Swiss authorities are welcoming of innovation reinforcing Switzerland's position as a successful financial marketplace.

Given the principle-based approach, there are practically no Fintech-specific rules in Swiss financial market laws. The Swiss financial regulator, the Swiss Financial Market Supervisory Authority (FINMA), aims to apply the law in a technology- neutral manner, a concept that also translates into FINMA's generally applicable ordinances and circulars. While certain of FINMA's circulars do address aspects of technological implementations, they do so mainly to remove barriers and level the playing field between traditional actors and Fintechs. An example of this is the 2016 circular on video- and online-identification of counterparties for anti-money laundering purposes.

Addressing the rapid developments in the financial market, the Swiss Federal Council in 2016 proposed certain easements and other changes to Swiss regulatory requirements, primarily with the intention to foster an active and sustainable Fintech ecosystem, but in most cases applicable to any business fulfilling the relevant requirements. Some of the proposed new rules were already enacted in 2017, while some are presently still in the process of being turned into law.

Extended holding period of third-party monies and sandbox regime

With effect as of August 1 2017, the Swiss Federal Council amended the Banking Ordinance to facilitate business models involving the holding of third party monies. This includes in particular crowdfunding and electronic payment processing services, but also traditional businesses with similar requirements. The rules allow for a broader scope of activities without triggering the requirement for a banking licence, the regulatory and financial burden of which would typically not be bearable for these businesses. Specifically,

the maximum period for a business to hold third-party monies in interest-free settlement accounts without being seen as accepting (bank-type) deposits from the public was lengthened from...

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