The latest revisions to the Swiss Financial Market Supervisory Authority‘s (FINMA) money laundering regulations require new Know Your Customer (KYC) processes for all cryptocurrency transactions over 1,000 CHF. The threshold was lowered from the 5,000 CHF that applies to other currencies.
The corrections are the necessary consequence of the latest adjustments to the Federal Act on the Combating of Money Laundering and Terrorist Financing (GwG). Due to the detailed provisions in the revised GwG, it is not necessary to specify the verification of the identity of the economically entitled person. However, the FINMA specifies in its ordinance the obligation of financial intermediaries to update customer data in an internal directive.
In addition, the Financial Market Supervisory Authority wants to clarify the handling of the threshold value for transactions with virtual currencies introduced at the beginning of 2021 with the partial revision. In view of the non-specified risks and cases of abuse in the past, the GwV-FINMA holds that the threshold value of 1,000 francs for related transactions within 30 days is decisive.
Higher threshold for traditional assets
Bitcoin should only be exchanged and traded up to 1,000 Swiss francs per month and a maximum of 5,000 Swiss francs per year without registration. For traditional assets such as gold or foreign currencies, this limit is 5,000 CHF per day; there is no monthly restriction. Opponents of the adjustment criticize the decision in relation to the promised technology neutrality of FINMA.
“The financial intermediary must identify the contracting party when a transaction with a virtual currency or several such transactions, which appear to be connected, reach or exceed the amount of 1,000 Swiss francs, provided that these transactions do not constitute money and value transfers and are not associated with these businesses a lasting business relationship.” – Fedlex, Publication platform for federal law
The FINMA is discriminating against cryptocurrencies with this adjustment, according to the Bitcoin Association Switzerland. The decision would create a legal difference between virtual currencies and traditional currencies, which would contradict the FINMA’s technology-neutral approach. In addition, the FINMA may require DLT trading platforms (exchanges, DEXs, NFT trading venues, etc.) to introduce a computer-based transaction monitoring system if this is necessary for effective monitoring.
Another burden for Swiss crypto firms?
The promotion of innovation on the Swiss financial market requires that companies are not burdened with excessive regulation and are free to develop business models that are in line with Swiss values of freedom and privacy. The present revision would require a thorough KYC process for anyone who buys more than 1,000 francs worth of cryptocurrency within 30 days.
The enforcement of a monthly limit in any amount requires new identification processes for Swiss crypto companies. Even small transactions must be tracked from December 1, 2022, in order to sum up the total transactions of a consumer over 30 days. A campaign by various industry representatives called on crypto users to object during the public consultation. Whether the FINMA will stick to the adjustment despite the headwind remains to be seen.