Switzerland is losing its shine as the most favored nations for launching the Initial Coin Offerings (ICOs) in the cryptocurrency market. In fact, the country was termed as a perfect launch pad for a number of ICOs last year. That was primarily because of the fresh set of guidelines announced in February by its Financial Market Supervisory Authority (FINMA). While the regulator wanted to provide more clarity to encourage ICOs in the country, it proved to be a counter-productive reaction from the industry.
Key Provisions of the Guidelines
Though FINMA could claim that its most recent guidelines were meant to provide more clarity for market participants, there were some key provisions that have hurt the ICO market in Switzerland. The guideline talked about the risks associated with the coins offering and addressed the concerns of investors in its 11-page documents. The main issue was money of money being laundered through crowdsales.
The main section that came under the clouds of the ICO was the Section 37, news.bitcoin.com reported. According to the document, “Anti-money laundering regulation gives rise to a range of due diligence requirements including the requirement to establish the identity of the beneficial owner and the obligation either to affiliate to a self-regulatory organisation (SRO) or to be subject directly to FINMA supervision. These requirements can be fulfilled by having the funds accepted via a financial intermediary who is already subject to the AMLA in Switzerland and who exercises on behalf of the organiser the corresponding due diligence requirements.”
The latest regulation makes it explicitly clear that the ICOs should engage a domestic firm to do KYC on all participants. This is an issue that is hurting the fresh ICOs from entering Switzerland since there is only handful of firms to do it. Also, the costing factor comes into play. For instance, accredited bodies charge a maximum of $25 per check of KYC in Switzerland. This is in contrast to the average cost of $0.6 – $2 per KYC check within the ICO space.
The new set of guidelines has only made crowdsale firms to be jittery and in awkward position. Also, the fresh set of rules has allowed ICOs to rethink on their tactics of hosting their show and even leave the projects. However, there was also another opinion, i.e. there was no need for KYC as long as the funds come from a legitimate bank and verified by the originating bank.
Grain Bears the Brunt
Following the announcement of new regulations, Grain ICO had to bear the brunt. Though it was scheduled to hit the market before the new regulations was to be announced, it preferred to wait for the long-term success of it apart from avoiding possible compliance issues.
As a result of waiting for the new guidelines, the company would have to bear additional costs for KYC. While a crowdsales KYC could costs around $30,000 for all participants, ICO Engine, a Swiss firm, charges 5 percent of all Ethereum raised. That would result in a payout of $200,000 just for verifying KYC. This showed why new ICOs are shunning the country.