A Boost to Crypto Companies as Switzerland Introduces Guidelines to Deepen Access to Banking System
Switzerland is home to over 500 blockchain and cryptocurrency startups. However, due to the restricted access to the banking sector, many projects have been moved to other countries. This is the problem that Switzerland, through the Swiss Bankers Association (SBA), is trying to solve by issuing guidelines to banks dealing with cryptocurrency startups.
Swiss Cryptocurrency Companies Checkered History
According to the Crypto Valley Association, there are approximately 530 blockchain startups spread in Zurich, Zug, and the Crypto Valley hub. These companies, like any other, require access to the traditional banking system to transact effectively.
They need to deposit cash, pay their current and long-term obligations, and carry out the financing activities that arise from their day-to-day operations. Until the recent development, Swiss banks have been giving crypto businesses a wide berth for fear of flouting the anti-money laundering rules in place.
Statistics from the financial services sector reveal that only 250 banks in Switzerland accepted cash equivalent deposits of cryptocurrencies raised in initial coin offerings (ICOs). Two out of the 250 banks withdrew their services in 2017. In a related move, the fourth largest bank in Switzerland, Zuercher Kantonalbank, closed the accounts of over 20 companies linked with cryptocurrencies.
Improving Cooperation between Crypto Businesses and Banks
In a bid to enhance the attractiveness of Switzerland as a financial hub, SBA has embarked on several initiatives to promote and support innovation in the digitization space. This includes blockchain technology.
SBA acknowledges the risks and skepticism around the technology. In their latest move, however, they are focused on bringing cryptocurrency guidelines at par with the legal framework guiding traditional banks.
With the guidelines in effect, processes such as the opening of accounts for blockchain companies are simpler and less risky.
The guidelines were developed and published with the support of an internal working group that brought together members from the banking industry and the Crypto Valley Association. Most of the guidelines addressed ICOs; specifically the opening of accounts for companies linked to digital fundraisers and the blockchain.
Guidelines Recommend Checks for Anti-Money Laundering
Some of the cryptocurrency companies carrying out ICOs do not conduct due diligence on their contributors and leaves a gaping hole to be exploited by money laundering architects. This is partly the reason Swiss banks have been shying away from transactions involving cryptocurrencies and blockchain.
The new guidelines are sealing these loopholes by introducing separate checks to be conducted when opening accounts for blockchain firms. In addition, the guidelines recommend KYC checks for ICOs raising funds both in cryptocurrencies and in fiat currencies such as dollars, euros, francs, and others.
The clarity the guidelines bring will help banks understand the different assessments they must carry out when dealing with cryptocurrency companies. On the other hand, cryptocurrency firms will know beforehand the kind of information to provide and measures to take for them to qualify for an account.
The overriding message from SBA was that the integrity and reputation of the Swiss financial sector must be maintained and remain a top priority for all the participants.