26.10.2023 – 12:51

Regulation of Fintech Businesses in Switzerland: How to be Technology-Adept with a Technology-Neutral Approach

Regulation of Fintech Businesses in Switzerland: How to be Technology-Adept with a Technology-Neutral Approach

BRIGITTA GYOERFI, Innovation Strategist, Digital Transformation, Digital Product Design, Business Ventures, Fintech

Regulation of Fintech Businesses in Switzerland: How to be Technology-Adept with a Technology-Neutral Approach

Switzerland's approach to fintech regulation stands out as a beacon of innovation and adaptability in the financial services sector. The Swiss financial regulatory landscape prides itself on its technology-neutral stance, striving to provide a level playing field for both fintech innovators and traditional financial institutions. This approach not only embraces technological advancements but also ensures regulatory consistency, regardless of whether businesses employ cutting-edge technology or rely on more conventional methods.

At the core of this regulatory philosophy lies the Swiss legal and regulatory framework governing financial services. While this framework wasn't originally designed with fintech in mind, it remains versatile and adaptable, accommodating the ever-evolving landscape of financial technology.

One of the hallmark characteristics of Switzerland's fintech regulation is its technological neutrality. In essence, it means that the country's financial regulations do not favour or disfavour businesses based on their use of technology. Whether a financial service is provided through traditional brick-and-mortar channels or leverages the latest in blockchain and artificial intelligence, it is subject to the same set of regulatory requirements.

This technology-neutral approach reflects a commitment to fairness and equal opportunities in the financial sector. It recognises that the distinction between traditional and technology-driven financial services is often blurred in practice. A payment made via a mobile app, for example, may involve more sophisticated technology but still fundamentally serves the same purpose as writing a check.

To navigate this regulatory environment effectively, fintech businesses operating in Switzerland must conduct a thorough, case-by-case assessment of their business models. They must carefully evaluate their activities and the specific financial regulations that apply to them. The following financial laws are particularly relevant in the Swiss fintech landscape:

Banking Act (BA): Fintech companies engaging in activities such as accepting deposits from the public or offering collective custody of cryptocurrencies may find themselves under the purview of the BA.
Anti-Money Laundering Act (AMLA): Fintech businesses acting as financial intermediaries, especially in connection with payment instruments, payment systems, portfolio management, or lending activities, fall within the scope of AMLA.
Collective Investment Schemes Act (CISA): Companies issuing or managing investment funds or engaging in activities related to collective investment schemes must adhere to CISA.
Financial Market Infrastructure Act (FinMIA): Fintech entities acting as financial market infrastructures, such as multilateral trading facilities, come under FinMIA's regulatory ambit.
Financial Institutions Act (FinIA): Securities firms, asset managers, and trustees are subject to FinIA.
Financial Services Act (FinSA): Fintech firms offering financial services for clients, such as investment advisory services, need to comply with FinSA.
Insurance Supervision Act (ISA): Companies operating as insurers or insurance intermediaries fall under the purview of the ISA.
Several other federal acts, including the Consumer Credit Act (CCA), Data Protection Act (DPA), and National Bank Act (NBA), may apply depending on the nature of a fintech business's activities.

The regulatory requirements for fintech businesses can encompass licencing or registration obligations and ongoing compliance and reporting duties. These requirements may pertain to various aspects, including capital adequacy, liquidity, organisational structure, documentation, and the fit-and-proper criteria for key individuals, shareholders, and the business itself.

A notable feature of Swiss fintech regulation is the availability of de minimis and other exemptions, which can be relevant depending on the scale and nature of a fintech company's activities. These exemptions may offer some relief to certain fintech operators.

The Swiss financial regulatory landscape benefits from the presence of the Financial Market Supervisory Authority (FINMA), the integrated supervisory authority for the Swiss financial market. FINMA plays a vital role in ensuring consistent and fair treatment of fintech operators and other financial institutions, thereby promoting regulatory stability and fostering innovation.

Furthermore, Switzerland boasts a well-established system of industry self-regulation through private organisations such as the Swiss Bankers Association (SBA) and the Asset Management Association Switzerland (AMAS). Some self-regulatory standards have received recognition from FINMA, especially in the area of money laundering prevention and other areas.

Switzerland's technology-neutral approach to fintech regulation sets a progressive and inclusive tone for the financial industry. By emphasising fairness and uniformity, it offers an attractive environment for fintech innovators and traditional providers alike. In this dynamic landscape, Switzerland continues to uphold its reputation as a global financial hub, blending traditional financial excellence with a forward-looking fintech ethos.

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Karen Wendt

President of SwissFinTechLadies