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BlockImmo becomes first regulated real estate crowdsale platform

By | Articles, CVA in the News | No Comments

BlockImmo is a CVA member based in Zug. This article originally appeared on CryptoCoin News.

Tokenized assets are here to stay. The current race is about who can get regulated products to the market first and then who can successfully gain user adoption. While several projects have purported to tokenize real estate assets, blockimmo is the first to do it within the bounds of existing regulations in two jurisdictions.

The blockimmo platform launched recently with two test properties, but they intend to have actual real estate listed in the beginning of 2019.

The way blockimmo works is a real estate seller lists the property on the platform, along with an issuance of tokens which will represent shares of the property. Investors are then able to invest however much they like and watch the crowdsale progress. Various terms and limits can be placed on the sale. Once the sale is complete, each person who invested receives representative tokens in their wallet, tokens which are associated with a real-world holding by an investment firm in Lichtenstein.

We’ve heard this before. Several projects are working on similar goals, with regulations and government approval being the primary stumbling blocks. One that comes to mind is LA Token. TrustToken aims to do similar things in the future, as well.

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The question of enforceability arises when there can be literally dozens of owners of a single property and the tokens can be swapped between wallets at will. To deal with this, blockimmo is limiting its operations to places where it is sure it can be fully regulated: Switzerland and Lichtenstein. They intend to expand to other parts of Europe as properties are successfully listed and the platform grows.

The properties that are sold on the platform, in a legal sense, are held by a Lichenstein firm, each with its own sub-fund. This is how the properties are secured in an IRL sense.

Switzerland is a great place to start a project like blockimmo because of the organization of its existing land registry. Founder Bastiaan Don said of this:

The properties we tokenise are already designated with the precise E-GRID number directly in the blockchain. This is already a known quantity in Switzerland and they are already entered as such in their own, centralised land register. Synchronising the systems would be a first step towards a land register on the Blockchain.

The big news last week for blockimmo was that FINMA, the Swiss financial regulatory body, had approved both their business model and their security token offering. This means they’re totally free to pursue their goals, and don’t have to worry about later running into problems with regulators. Swiss laws still apply to properties that are listed and exist within Switzerland, and there are various restrictions on foreigners investing in Swiss real estate.

FINMA announced this week that blockchain companies would be able to successfully operate in Switzerland with only minimal changes to its regulations.

The project has brought in a legal firm called MME to help it with legal issues that may arise, and also has the backing of family-run bank, Bank Frick, whose Director of Funds & Products, Raphael Haldner, said of the project:

The implementation of projects like blockimmo demonstrates the expertise of Bank Frick in the field of digital business models and products, as well our innovative drive.

Two example properties are live at blockimmo.ch so the public can see how the platform is intended to work. Real listings are expected to be happening as early as next month.

CVA Statement on Swiss Blockchain/DLT Regulatory Report

By | Articles, Public Announcements

 

Friday, 14 December 2018 – The Swiss Federal Council today released a report detailing Switzerland’s regulatory framework regarding cryptocurrencies and blockchain technology. The report was prepared in consultation with internal and external stakeholders — including the Crypto Valley Association (CVA) which provided input through its Policy and Regulatory Working Group, chaired by Dr Mattia Rattaggi.

The report indicates that the Swiss government will not seek to draft and implement new legislation for crypto and blockchain issues, but rather will seek to apply existing laws.

Dr Rattaggi expressed satisfaction with the contents of the report stating,

The CVA welcomes the release of the Federal Council’s report, and is entirely in tune with its goal to create the best possible framework conditions  for “Crypto Nation Switzerland,” while underlining the country’s integrity and reputation as a financial centre and business location.

It is positive that this is to be achieved through targeted adjustments to the existing legal framework – instead of issuing completely new laws.

We feel that this approach best represents the principle of technological neutrality and is in line with the position taken by the CVA in the consultation process. Crucially, this approach ensures maximum consistency within the current legal framework while keeping it principle-based and flexible, while allowing changes to be adopted on a ‘need-to-regulate’ basis.

To a large extent, the report also confirms what we, in the Crypto Valley community, have known for some time — that Switzerland’s regulatory system is already open and relatively flexible These are attributes that have been fundamental in the Crypto Valley’s emergence as a global hub of blockchain innovation.

The CVA Policy and Regulatory Working Group will work to analyse the details of the report, communicate its contents and implications to the CVA Membership and to continue cooperate with government stakeholders to build the wider Crypto Valley ecosystem.


 

If you’re interested in more regulatory information, you can read some of the papers published by the Policy and Regulatory Working Group here.

EXPERTsuisse issues first Swiss ICO accounting guidelines for utility tokens

By | Articles, CVA in the News

By Markus Vogel – Chair, Crypto Valley Association Working Group Tax / Accounting / Structuring & Tax Partner at KPMG Switzerland

With the release of the Q&A on special accounting topics (Accounting of ICO’s with Utility Tokens) by EXPERTsuisse the very first Swiss accounting guidelines for the issuance of utility tokens have been established. This constitutes a remarkable milestone achievement in the midst of the so called “Crypto Winter”.

EXPERTsuisse, the Swiss Expert Association for audit, tax and fiduciary practitioners, has mandated its Accounting Standards Committee to establish the very first Swiss ICO accounting guidelines for utility tokens in close collaboration with the CVA Working Group Tax / Accounting / Structuring.

The result of this fruitful collaboration is the Q&A referred to above.

In parallel, KPMG Switzerland, Strategic Partner of the CVA, has also edited an article (in German) in EXPERT FOCUS covering the publication of the Q&A.

It can be accessed here.

What’s the relevance of the Q&A?

The new ICO accounting guidelines for utility tokens revise the currently widely applied and tax driven practice of the „provision model“. Under the provision model any kind of proceeds originated in token sales / ICO activities are recognized as taxable income resp. revenue. However, this taxable income is offset by a provision in the same amount. In turn, corporate income taxation of ICO proceeds is deferred until the ICO project completion.

After having reviewed the current practice from a Swiss accounting perspective, it has been found that there are several inconsistencies with general accounting principles which need to be addressed.

What are the new guidelines?

The new ICO accounting guidelines are illustrated in the Q&A at hand of a simplified, but still representative case study named “Open.” Open engages in the development of an open-source blockchain protocol. In case of a successful delivery of the protocol, the ICO participants shall be entitled to partake in the allocation of the genesis block.

The new ICO accounting guidelines for utility tokens closely follow the accounting principles for long-term manufacturing orders under Swiss GAAP FER 22/3 and are also in line with the Swiss Code of Obligations. Although there is usually no legally enforceable contractual relationship, the public announcement of the development of the platform within the whitepaper is sufficient to assume a factual obligation. Hence, the respective ICO company has the implicit order from the token purchasers to put sincere efforts into the development of the respective decentralized platform. These efforts are considered to be financed at hand of so called advance payments without repayment obligations.

Since it is assumed that the prerequisites for the application of the usual “percentage-of-completion-method” are likely not fulfilled, any proceeds from an ICO project needs to be recognized as revenue in the amount of expenses directly attributable to the ICO project in a given fiscal year without disclosing any profit element.

Having said that, any expenses directly attributable to the ICO project can be deducted from the received advance payments (without repayment obligations) which are considered as liabilities in the balance sheet.

As a consequence, any “excess advance payment amount” at the end of the development phase of the decentralized protocol shall be recognized as revenue respectively profit. In case, it becomes evident that the raised financing is not sufficient to cover all development expenses for the ICO project, a so-called contingency provision needs to be booked. Reflecting on the outcome under the new ICO accounting guidelines, the profit recognition for accounting and tax purposes still corresponds to the timing under the provision model.

Besides the above-mentioned changes, the new ICO accounting guidelines for utility tokens have also specified the accounting treatment of own token reserves (from genesis mining). They stipulate that any own token reserves need to be priced at historic production costs in the financial statement of the respective ICO company since a market price valuation appears to be inappropriate.

Final remarks

As outlined in the beginning, today’s publication of the Swiss ICO accounting guidelines for utility tokens is an outstanding achievement and emphasizes the uniqueness of the ecosystem Crypto Valley and all Switzerland can offer to anyone working on the break-through of this great emerging technology.

The Accounting Standards Committee and the CVA Working Group Tax / Accounting / Structuring continue their productive collaboration and have already started working on the respective accounting guidelines for asset tokens.

 

Zug citizens open to more blockchain-based e-voting

By | Articles, CVA in the News

Nearly eight in ten of respondents in Zug welcome e-voting secured by blockchain technology 

Zug, SWITZERLAND — November 30, 2018 — Most residents of Zug, Switzerland, approve of e-voting secured by blockchain technology as it makes voting quicker and easier than traditional ballots, according to those who participated in the country’s first ever blockchain-based e-vote last summer.

The City of Zug, Hochschule Luzern’s Blockchain Lab, and Luxoft, today jointly release a report evaluating the results of the e-vote in Zug. The report highlights the benefits of decentralized voting, outlines the underlying architecture of the blockchain-based system and analyses the experience of residents who participated in the vote.

More than 220 people in Zug have a registered digital ID and were eligible to vote on the platform, and nearly 100 responded to the survey carried out by the City, following the blockchain-based municipal vote on June 25 and July 1.[1]

The findings reveal that most residents welcome the prospect of more blockchain-based e-votes; 79% welcome the use of e-voting in the city, with just 2% opposed to it. Moreover, 52% agree that e-voting should be introduced to make voting easier and quicker than filling out a ballot. Despite the high level of approval amongst residents, some remain skeptical about the security of e-voting.  While 21% believe blockchain technology makes electronic voting more secure, 16% have security concerns.

The voters praised each element of the voting solution built by Luxoft, from verification to the use of private keys.  Many voters noted that not enough had been done to raise awareness of the voting trial to boost participation. This is reflected in the fact that of the residents that took part, 75% already owned a digital ID and only 25% needed to acquire a digital ID to vote. Residents therefore accept that the option to vote by mail in addition to e-voting is still needed today until further progress is made.

Zug’s city president, Dolfi Müller, welcomed the feedback and commented, “It is nice to see that, despite some minor difficulties, many people in Zug are happy to live in such an innovative community and look forward to further research and development in the field of digital ID and blockchain technology.”

“It’s clear from this report that voters in Switzerland today recognize the value in using a blockchain-based e-voting system,” said Vasily Suvorov, Luxoft’s Chief Technology Officer. “While the technology that underlies this system is extremely complex, residents agreed that the platform was simple and practical to use. This is a platform that makes it easy for people to interact with blockchain on an everyday basis.”

Dr. Alex Denzler, head of Hochschule Luzern’s Blockchain Lab concluded, “There is still more progress to be made before we see such systems implemented globally. All the partners integral to expand the blockchain-based e-voting system continue to collaborate so it can become an established, reliable solution for voters everywhere.”

 

[1] There are 220 residents in Zug with digital identities. 72 took part in the vote between June 25 and July 1, and 95 responded to the city’s survey after the vote to provide feedback on e-voting secured by blockchain technology and the voting process.

More digital ID from uPort and SBB

By | Articles
Is blockchain really going places? Yes, it is – in part thanks to the Swiss rail system!
This week, news on the blockchain development front is coming straight out of Switzerland’s Crypto Valley as the Swiss Federal Railway (SBB) has announced that it has recently co-designed a decentralised identity pilot with Linum Labs, using the uPort self-sovereign digital identity solution.
With SBB maintaining thousands of construction sites and over 30,000 employees across Switzerland, the pilot was built as a solution to verify the identity of construction workers at each site. Having multiple parties making entries on a record needed for public safety, ultimately linked to an individual’s identity, made this an ideal fit for a decentralised identity pilot. This would enable simple interoperability between all of the different actors.
This comes less than six months after the city of Zug tested a pilot application built using uPort for the identity of its citizens during the voting process.
More details on the SBB and Linum Labs pilot can be found here.
uPort is supported by ConsenSys, one of the leading blockchain development companies worldwide and a Strategic Partner of the Crypto Valley Association.

Linum Labs AG is a Swiss-based company that aims to build decentralized systems towards a healthier society, with a focus on health and identity.

CVA is founding member of Swiss Blockchain Federation

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The Crypto Valley Association is happy to announce that it is supporting the launch of the Swiss Blockchain Federation as a founding member. The Swiss Blockchain Federation (formerly the Swiss Blockchain Taskforce) is a publicprivate partnership, combining agents from the blockchain sector, the fields of politics and economics, the scientific community and the public sphere.
 
The aim of the Federation is to enhance Switzerland’s status as an attractive location for blockchain-based activities and maintain the country’s competitive edge in the sector.
 
The Crypto Valley Association looks forward to working with other members of the Federation to promote the crypto and blockchain ecosystem in Switzerland and beyond – and building bridges across all areas of the worldwide blockchain community.
More information can be found here (in German).

Interview with SEBA Guido Buehler

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SEBA Crypto AG recently made waves by announcing its launch of a bid to become Switzerland’s first fully-regulated crypto bank – building a bridge between the fiat and crypto world.

Its CEO, Guido Buehler (formerly of UBS) shared his thoughts on the vision for SEBA and what it might mean for Crypto Valley in an interview originally published on Sionik.


 

Tell us briefly how the idea for SEBA came about…

Just like almost everything else in our world, money is going digital. When I pulled the SEBA team together in early February, I had in mind a new type of bank. A bank that bridges the gap between the old and the new economies and one that promotes the core values of Safety, Transparency and Performance.  We are undergoing an economic transformation of epic proportions. Blockchain technology, the Internet of Things melding with the Internet of Money, the convergence of Cryptography, Computer Science and Economics – all of these technologies are enablers of the Fourth Industrial Revolution, which I and many believe is upon us.

Blockchain, also referred to as Distributed Ledger Technology (DLT), is about more than crypto currency or digital money. DLT is fundamental to securely storing physical assets in a digital format. By creating global, tamper-proof ledgers that authenticate ownership, assets such as securities, property deeds, artwork, jewelry and diamonds, personal identity documents and educational and other certificates of authenticity can be instantly validated, reducing the potential for theft and fraud. The proliferation of DLT is leading to the formation of new markets and innovative ways of creating value. This convergence of the digital and tangible worlds creates a significant need for a new type of banking paradigm. That’s why at SEBA, we are committed to redefining finance for the new economy.

If you could condense into one sentence – what is the mission of SEBA?

To be one of the world’s first universal, fully licensed and supervised crypto banks that will bridge the divide between traditional fiat and the new world of crypto.

You are aiming to obtain the highest level of banking license and yet many (most) refer to SEBA as a “crypto bank” – how do you reconcile these two aspects?

It is important to understand that FINMA doesn’t have a type of license that is specific to crypto banks. We are in contact with FINMA to apply for a Banking and Securities Dealer license.  What this means is that we will be able to offer crypto AND fiat – transaction banking and all other services – all from one financial services partner.

Our ambition is to help our clients achieve exceptional performance in terms of wealth management and growth, within a supervised and regulated framework. In today’s newly forming economy, we must be able to offer these services across both crypto and fiat, because crypto is rapidly emerging as a desirable asset class. We would not be able to deliver on our promise without the highest level of banking license attainable.

Does Switzerland and the blockchain world really need a “crypto bank?”

We believe the world does need a crypto bank because today, there is no gateway for major financial investors that facilitates movement of assets between the crypto and traditional financial markets. The crypto market’s global and unregulated nature means that significant groups within the traditional markets, such as institutional investors, asset and wealth managers, and family offices exclude themselves because the crypto markets are perceived to be too risky and speculative. The existing KYC, AML and other applicable laws and regulations may flexibly be adopted to crypto markets, but the majority of large institutional investors, who have a moderate risk tolerance, exclude themselves because of the lack of regulated and supervised market participants.

It is our vision that SEBA’s supervised and regulated services will encourage wider participation and form a bridge between crypto and traditional financial markets.

 

A majority of your team (yourself included) come from UBS – is this a value add or a downside for your development and eventual work with the core crypto community?

It’s good for a headline but it doesn’t accurately reflect the diverse nature of our team.  While some on our team have worked at UBS, Citi, Credit Suisse, Vontobel, etc, we also have security and technology experts from outside the banking world. And of course, we have deep expertise in the emerging crypto economy. We wouldn’t be able to deliver on our promise if we weren’t diversified outside the banking sphere.

The salient point to note is that everyone on the team has a track record for innovation and an entrepreneurial spirit, no matter what their background. We believe it is this combination of skill that is required to redefine finance for the new economy.

Much has been made of the trouble startups have in getting bank accounts in Switzerland. Is part of your mission to fix this? What does SEBA aim to offer blockchain/crypto startups?

Recent SBA indications are that blockchain businesses should be treated the same as other businesses. It is our ambition that to offer custody storage, transaction banking, trading and liquidity management, and crypto corporate finance services to crypto/blockchain companies funded in crypto currency.           

Let’s imagine for a moment that SEBA fails to obtain a banking license – will the project have been in vain? Is the value of attempting this as big as actually achieving it?

The world is changing, and I believe that all financial institutions know that crypto assets will eventually become part of investment portfolios, and a new manner of storing and creating wealth. We intend to obtain one of the first truly universal crypto banking licenses so we can deliver an incredibly important infrastructural piece of the crypto economy. Our efforts will not be in vain!

Can you tell us where the name “SEBA” came from?

We chose the name SEBA because it transcends geography and languages, it is feminine and masculine, to us it represents the ying and the yang. It speaks clearly to our ethos to kill the duality between crypto and fiat.

From your current position, what advice would you give to incumbent banks (i.e. UBS, Credit Suisse etc)?

I’ve no need to advise any banks, they have their own intentions and plans with regard to the digital economy.  Our ambition is to serve the wider banking economy, serving crypto companies, institutional investors, professional investors and even banks if they decide they need a gateway into the crypto world.

What are your impressions of the Crypto Valley ecosystem? Where do you think it is headed in the next 9-12 months?

SEBA is honoured to be part of the Crypto Valley ecosystem. We may be perceived as old bankers, but this is the true meaning of the merging of the traditional and the new economies. Old meets New! We are financiers, bankers, traders and security experts with a team of blockchain experts and world-class technology partners who are building a bridge between the traditional and new financial economies. The Crypto Valley ecosystem can only benefit from such a bridge.

Document yourself with regards to Swiss VAT uncertainties

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In this year’s early summer days, the Swiss Federal Tax Authorities (SFTA) has responded for the first time – after lengthy internal consultations – with a draft practice circular to the pressing issue of the treatment of crypto businesses and transactions such as ICOs and TGEs for Swiss value-added tax (VAT) purposes. Although it has been a first move into the right direction, the draft practice circular leaves a fair amount of questions and uncertainties which will remain until the final text has been confirmed by the SFTA. Hence, an impressive amount of comments has been submitted to the attention of the SFTA (incl. several members of the Crypto Valley Association Working Group Tax / Accounting / Structuring [CVA WG TAS]) to ensure the viewpoints of the crypto community are properly understood.

Nevertheless, business must go on and start-ups need to deal with such VAT uncertainties in an appropriate manner. Given the fact that unknowingness does not protect you from sanctions, it becomes necessary to smartly document the internal VAT and risk assessment of such VAT uncertainties.

A plausible option could be to supplement your accounts with a write-up of your internal considerations and reflections whether you see a VAT liability accruing or not from your business activities. Such documents and policy help proving a best-efforts approach once the final text of the VAT practice will be enforced. By not proactively acting upon these VAT uncertainties, there is a certain risk that the SFTA might interpret such behavior as being ignorant to the rule of law and could subject you to adverse VAT effects.

The Crypto Valley Association Working Group Tax / Accounting / Structuring and its members are available in case you look for professional support:

New WG Co-Chair for Western Switzerland Chapter

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The Western Switzerland Chapter of the Crypto Valley Association is glad to welcome Aires Marques as new co-chair to help further the expansion of the ecosystem in Swiss Romandie.

Until recently Aires, whilst a Senior Principal Blockchain Consultant at Oracle, oversaw the coordination of the Romandie Chapter of Toastmasters.

Special welcome to Aires!

CVA Statement on Swiss Banking Association Guidelines

By | Articles, CVA in the News

Swiss Bankers Association – with support from the Crypto Valley Association – has developed guidance for Swiss banks opening bank accounts for crypto & blockchain companies.

The Crypto Valley Association (CVA) welcomes the issuance of new guidance from the Swiss Bankers Association (SBA) to its members, regarding the treatment of blockchain-based companies in the country. The new guidance directed to member banks of the SBA is intended to provide increased clarity and assurance and remove barriers to the growth of the Swiss blockchain ecosystem.

The guide, an initiative of the SBA and developed with the input and assistance of the CVA Regulatory Working Group, makes key distinctions between blockchain-focused companies seeking to raise capital through an Initial Coin Offering (ICO) and those who do not. According to the outline, companies which do not fundraise through an ICO should be treated no differently than regular Small Medium Enterprises (SMEs). Further distinction regarding documentation needed is made between ICOs carried out with fiat currencies and those using cryptocurrencies. The guide has been welcomed by FDF, the Federal Department of Finance, and FINMA, the Swiss Financial Market Supervisory Authority.

Oliver Bussmann, President of the Crypto Valley Association, welcomed the announcement, saying “We have seen a lot of positive growth in the ecosystem over the past 18 months and now it was very important that the SBA, CVA and authorities could come together and successfully work on a solution that can ease some of the restrictions that could hamper the continuation of that growth.”

Dr Mattia Rattaggi, who chairs the CVA Regulatory Working Group, added, “This guide is an important and timely contribution. As a multi-stakeholder organization it was important for us at the CVA to bring a diverse range of perspectives and expertise to the table for the development of these guidance and we hope that it will benefit the healthy advancement of the crypto/blockchain industry in Switzerland.”

Switzerland has gained a world-wide reputation as a popular destination for crypto and blockchain companies. In 2017, four of the ten largest ICOs were conducted in Switzerland. In 2018 the country continues to rank among the most attractive places for blockchain companies.

Read the SBA announcement here.