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Policy / Regulations

CVA Initiative Regarding FATF Guidance for Virtual Assets

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The Financial Action Task Force (FATF) has recently updated its Guidance on the treatment of Virtual Assets (VA) and Virtual Asset Service Providers (VASP), which lays out due diligence measures that must be implemented to prevent money laundering and terrorism financing.

The Crypto Valley Association (CVA) recognizes that this new Guidance presents significant challenges to members who may issue or deal in VAs and who may be classified as VASPs (defined below).

With this in mind, the CVA will be conducting one or more information session(s) in the upcoming months in order to inform members and the DLT community of requirements and possible solutions regarding compliance with the new Guidance, which will soon be reflected in domestic regulations.The CVA will equally liaise with relevant authorities and counterparts in Switzerland and abroad to support the implementation of the Guidance.

What is a VASP?

Virtual Asset Service Provider (VASP) means any natural or legal person who conducts one or more of the following activities for or on behalf of another natural or legal person:

  • exchange between virtual assets and fiat currencies;
  • exchange between one or more forms of virtual assets;
  • transfer of virtual assets;
  • safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets (i.e. custody / custodial wallet solutions); and
  • participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset (i.e. initial token or crypto offering).

The new FATF guidance includes recommendations on several key points, including;

1. VASPs must join the fight against money laundering / terrorism finanicing

Exchanges, crypto banks, issuers of payment tokens and the like will need to be licensed and implement a program to manage AML/CTF (identify and verify the authenticity of clients, monitor transactions, etc.) for transactions above USD 1,000.

2. Travel rule

VA transfers that take place between a VASP and other financial intermediates (i.e. other VASP, banks) will require the originating party (ie. sender) to obtain, hold and transmit required information on both the sender & recipient, including names, residential and wallet addresses. Similar requirements are placed on receiving / beneficiary VASPs.

3. SRO

VASPs should be supervised or monitored by a competent authority, not a self-regulatory body. FINMA-licensed SROs should be considered competent authorities in Switzerland.

Note: During the process of refining its Guidance (first issued in 2015), the CVA’s Regulatory and Policy Working Group provided input to the FATF, with consideration to the needs and experience of Crypto Valley companies and the industry as a whole.

Read the CVA’s submission to the FATF.

The CVA encourages all of its members to join in the conversation and attend the information  sessions – and be prepared to follow developments in the space with careful attention.

 

CVA Contribution to Consultation on Framework Conditions for Blockchain/DLT

By | Articles, Policy / Regulations

The Swiss State Secretariat for International Finance (SIF) recently closed a round of public consultations aimed at gathering input on the possible framework improvements to for DLT and blockchain.

As with previous such consultations, the Crypto Valley Association was active in gathering input and providing an opinion paper to the SIF, in particular with the support of the CVA’s Regulatory and Policy Working Group chaired by Thomas Stoltz and Tobias Kallenbach.

Read the CVA’s Position Paper here.

EXPERTsuisse issues Swiss ICO accounting guidelines for asset tokens

By | Articles, Policy / Regulations

Author: Markus Vogel, Chair CVA Tax / Accounting / Structuring Working Group and Tax Partner at KPMG Switzerland

After the release of the Q&A on special accounting topics last December 2018 (Accounting of ICO’s with Utility Tokens), EXPERTsuisse in collaboration with CVA’s Working Group for Tax and Accounting has further clarified the Swiss accounting guidelines for asset token ICOs. The accounting guidelines for asset token ICOs have been jointly published by the EXPERTsuisse with the Crypto Valley Association. This reinforces the commitment of the leading institution in the Swiss accounting landscape to further clarify the accounting treatment of crypto transactions.

EXPERTsuisse, the Swiss Expert Association for audit, tax and fiduciary practitioners, has mandated its Accounting Standards Committee to establish the Swiss ICO accounting guidelines for asset tokens in close collaboration with the CVA Working Group Tax / Accounting / Structuring. The result of this continued great collaboration can be accessed below and also contains:

  • Additional clarifying statements in respect of the Swiss accounting guidelines for utility token ICOs which have been published in December 2018:
    • Treatment of genesis block generation in light of a subsequent token sale;
    • Swiss foundations as token issuing entities,
    • Treatment of capital gains and losses in cryptocurrency holdings raised through an ICO;
    • Treatment of development of proprietary blockchain protocols.
  • The accounting principles applicable to cryptocurrencies such as Bitcoin.

Read the guidelines – in German / in French.

What are the new guidelines?

The new accounting guidelines detail the accounting treatment of so-called asset tokens. Asset tokens generally represent any kind of tokenised asset which carry either an ownership right in respect of an asset or company resp. a relative right regarding future profits or cash flows.

Within these accounting guidelines, the accounting treatment is illustrated at hand of two distinct case studies. The first case study represents the issuance of the IMMO Coins which are legally structured as participation certificates (Partizipationsschein) for the financing of real estate acquisitions. The accounting treatment at hand does not materially deviate from the one applied to the issuance of non-tokenised participation certificates.

The second case study – “ROB” – entails the issuance of ROB Coins in the context of the pre-financing of the development and marketing of a robot. In exchange for this pre-financing, the token purchasers acquire the right to a 10%-revenue participation in the issuing company. The accounting treatment closely follows the same analogy as used for the utility token of the advance payment without any repayment obligation.

At the case at hand, there are two factual obligations borne by the ICO company: i) a development obligation of a robot as well as ii) a marketing obligation of the robot. Hence, the respective ICO company has the implicit order from the token purchasers to put sincere efforts into the development and marketing of the robot. These efforts are considered to be financed at hand of so-called advance payments without repayment obligations.

Any product development expense directly attributable to the ICO project can be deducted from the received advance payments (without repayment obligations). Further on, if there is still an excess amount of advance payments (without repayment obligations) after the completion of the product development stage of the robot, any relevant marketing expense for the robot can be deducted from this liability until it’s fully absorbed.

Final remarks

As outlined in the beginning, the publication of the Swiss ICO accounting guidelines for asset tokens confirms the commitment of leading accounting institution in Switzerland to further improve the local conditions for crypto businesses. The CVA Tax / Accounting / Structuring Working Group maintains close ties to EXPERTsuisse and will inform you in due time about the planned meet-up activity relating to these new accounting guidelines.