Innovation 2020
FinTech licence
The FinTech licence allows providers of financial services to accept public deposits of up to CHF 100m, provided that these deposits are not invested and no interest is paid on them. The licence is available for all business models in connection with the acceptance of public deposits. However, the enquiries received by FINMA in 2020 showed that it was primarily of interest for business models related to payments. FinTech licensees that operate a significant payments business in Swiss francs also have the opportunity to request access to the Swiss Interbank Clearing system (SIC system) from the Swiss National Bank (SNB). FINMA granted the first FinTech licence in the first quarter. The licensed start-up company plans to offer comprehensive payment services to its customers based on an innovative technological platform. Further licence applications were received by FINMA in the year under review, which it will decide on in 2021.
Diem (formerly Libra)
In its press release of 16 April 2020, FINMA made public the receipt of the licence application from the Libra Association, renamed the Diem Association in December, based in Geneva. The applicant is seeking a licence as a payment system operator in accordance with the Financial Market Infrastructure Act (FMIA). The application is based on the information contained in the updated white paper published in April 2020, which differs considerably from the originally envisaged project. In particular, it proposes that the Diem payment system will support single-currency stable coins.
The submission of the revised application marked the start of the formal licensing process under Swiss supervisory law. The outcome and duration of the procedure remain open. FINMA will analyse the application thoroughly and request amendments in the event of any outstanding issues. As provided by the FMIA, FINMA will impose additional requirements for any aspects that pose increased risks such as bank-like activities. FINMA will also examine whether national and international standards for payment systems and for combating money laundering are upheld.
The planned scope of the project requires an internationally coordinated approach. Besides the SNB, FINMA is in close and regular contact with more than 30 supervisory authorities and central banks. Furthermore, it is also actively contributing to various international working groups and collaborating on the development of international standards on stable coins.
Collaboration on regulatory project for improving the statutory framework
In 2020 the legislative proposal for improving the statutory framework for blockchain and distributed ledger technology (DLT) was addressed by the Swiss Parliament. Work on the necessary ordinance amendments commenced simultaneously. FINMA actively collaborated with the responsible federal offices on this project, while focusing on the dual goals of legal certainty and technology neutrality. The comprehensibility of the highly technical provisions was an additional objective of FINMA’s work. Furthermore, some important and complex questions arose in connection with bankruptcy law.
The requirements placed on the new trading systems for distributed ledger technology (DLT) securities were a further core issue. It is FINMA’s intent to find the right balance between facilitating technological innovation and ensuring stringent supervision in order to safeguard the credibility of the Swiss financial centre. Accordingly, expanding access to DLT-based trading systems for retail customers and the closely related topics of anti-money laundering, investor protection and market conduct were addressed in detail.
Enquiries about blockchain-based business models
Numerous interested parties contacted FINMA in 2020 with enquiries concerning the authorisation requirement of blockchain-based business models. These concerned initial coin offerings (ICOs), stable coins and the operational phase of some complex business models. Following the publication of guidelines on stable coins in 2019, FINMA continued to address the further development of its own practice regarding authorisation requirements in the year under review.
A prevailing topic among the authorisation enquiries in 2020 were decentralised business models. Frequently, these are business models that enable end customers to contact each other directly and to engage in activities that may be governed by financial market law. The particular challenge is that technological developments are increasingly giving rise to operating models that divide activities into several different components, which makes classification of the service requiring a licence difficult. Instead of a financial service from a single provider, largely traditional financial market offerings are replicated via software applications and open-access DLT systems on a decentralised basis. Examples include custody, exchange and trading of digital assets in the form of tokens. For such innovative applications FINMA remains focused on the economic functions of the projects (substance over form) and gives due consideration to the proven principle of same business, same risks, same rules as prescribed by law.
(From the Annual Report 2020)
