Token Classification: The Key to Swiss Crypto Regulations
Understanding token classification is critical for navigating Switzerland’s regulatory landscape. The classification determines the applicable laws, such as AML regulations for payment tokens or securities regulations for asset tokens. Proper analysis and categorization are essential steps for any entity issuing or managing tokens.
For tailored guidance on your crypto exchange or ICO project, contact us at [email protected].
Categories of Tokens
1. Payment Tokens
- Definition: Used as a medium of exchange for goods, services, or value transfer.
- Regulation:
- Not considered securities.
- Subject to AMLA if transferable on a blockchain.
- Typically do not represent claims on the issuer.
- Example: Bitcoin (BTC)
- Bitcoin functions as a decentralized digital currency for transactions. It does not represent any claim on the issuer and is not classified as a security.
2. Utility Tokens
- Definition: Provide access to blockchain-based applications or services.
- Regulation:
- Not securities if used solely for access rights.
- Considered securities if they also serve as an investment.
- Subject to AMLA if used as a payment method.
- Example: Ethereum (ETH)
- Ether allows interaction with smart contracts and DApps on the Ethereum platform. While primarily a utility token, it could be considered a security if it offers investment benefits.
3. Hybrid Utility Tokens
- Definition: Combine utility and investment functions.
- Example: Binance Coin (BNB)
- Used for reduced trading fees and exclusive access within the Binance ecosystem. BNB also has investment characteristics due to potential appreciation in value.
4. Asset Tokens
- Definition: Represent ownership in assets like equity, debt claims, or derivatives.
- Regulation:
- Always considered securities.
- Not subject to AMLA as a means of payment.
- Example: tZERO (TZROP)
- Represents equity in the tZERO platform, offering holders a share of the company’s profits.
Token Phases in ICO Development
The regulatory implications of a token depend on its lifecycle phase, from pre-financing to full operation.
1. Pre-financing and Pre-sale
- Description: Investors are offered claims to future tokens before blockchain development.
- Regulation:
- Considered securities due to claims on future assets.
- Not subject to AMLA or treated as means of payment.
2. Existing Tokens
- Description: Fully functional tokens already in circulation on a blockchain.
- Regulation:
- Generally not securities.
- Subject to AMLA if transferable on a blockchain.
- Classified as means of payment.
3. ICO of Payment Tokens
- Description: Tokens designed specifically for transactions or purchasing goods/services.
- Regulation:
- Not securities.
- Must comply with AMLA as means of payment.
4. ICO of Utility Tokens
- Description: Provide access to blockchain-based platforms or applications.
- Regulation:
- Not securities if solely for access.
- Treated as securities if they serve investment purposes.
- Subject to AMLA if used as payment.
5. ICO of Asset Tokens
- Description: Represent ownership or debt claims, similar to stocks or bonds.
- Regulation:
- Always considered securities.
- Not subject to AMLA or used as means of payment.
Key Takeaways
By understanding token classifications and phases, issuers and investors can ensure compliance with Swiss financial laws while protecting stakeholder interests.
For expert advice on Swiss token regulations and ICO planning, reach out to us at [email protected].
