Thread by @msantoriESQ

Switzerland's financial regulator just issued landmark guidance on ICOs. Here's brief tweet tempest breaking down the high points and how it fits into the big picture.

finma.ch/en/news/2018/0…

2/ FINMA's guidance says we should be thinking about two major bodies of law: securities and AML. [There's tax, too, which is a big reason why the OG ICOs went to Switzerland in the first place, but that's a topic for another day]

3/ Let's talk about securities first. Under Swiss law there are now three kinds of tokens: "Payment Tokens", "Utility Tokens" and " Asset Tokens".

You can tell the difference based on a weird factor called "intent". If a token is "intended" to act as a payment system, like Bitcoin, Monero, etc. they aren't securities under Swiss law. ICO them all day Fabulous.

If the token is intended to be a replacement for a traditional security, e.g. it confers a right to dividends or ownership of an enterprise, then it's called an "asset token" and it falls under the securities laws.

Asset tokens are securities both when they're pre-sold or sold directly. Makes sense. Derivatives, debt instruments, etc. all fall under this category.

Now for the interesting part: Utility tokens. Utility tokens are tokens which are "intended to provide access digitally to an application or service by means of
a blockchain-based infrastructure" - a mouthful but not inaccurate.

Utility tokens are not securities according to FINMA!
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unless...

...unless they "additionally or only have an investment purpose at the point of issue." Sales of pre-functional utility tokens create securities in Switzerland, according to FINMA.

Importantly, any asset token-like elements included in a utility token will make it a security. Makes sense, mostly. Give something the right features of a security and it becomes one.

"Isn't this a wholesale validation of the SAFT framework?" ...is a question I've gotten.

Well, I don't think it's far off. But there are some important differences in reasoning and in practice between the Swiss approach and the SAFT framework.

Either way, this is tremendously positive news for the ecosystem. I was glad to read it. There's some meaty stuff on the AML side too...

Sales of Payment Tokens require the issuer to do AML, KYC and all the rest during the ICO. So do sales of "Utility Tokens" that can be widely used as means of payment. This is weird. Can't most utility tokens be used as a form of payment?

FINMA clarifies that a token falls outside of the AML laws depending upon another subjective "mens rea" factor: only if "the main reason for issuing the tokens
is to provide access rights to a non-financial application of blockchain technology

Hope this is helpful. A caveat: I'm not a Swiss lawyer and I mostly just tried to digest what the English translation of the guidance said. Want to ICO in Switzerland? Probably wise to engage Swiss counsel.