How to properly run an ICO/TGE in Switzerland By Dr. Katharina Lasota Heller, LL.M. Baar/Zug, 6 th of November 2018
Overview 1. Ecosystem in Switzerland and Crypto-Valley 2. What is an ICO or TGE? 3. Classification of Coins and Tokens 4. Tax related implications 5. Regulatory implications 6. Setting Up a bank account 7. Setting up an entity 8. Milestones of an ICO process 9. Swiss-Polish Blockchain Association
Switzerland and Crypto Valley Switzerland is a definitely a great place to run an ICO. It offers stability of legal, political and economic system, pragmatism and friendly approach towards business. Switzerland s Crypto Valley is known all over the world as one - if not THE - place to be for blockchain companies. Many people think of it like a Mecca - and dream of being able to come and set up their startup in the Valley. And over the past year it has been a dream for those doing an ICO.
What is an ICO or TGE? ICO Initial Coin Offering TGE Token Generating Event
Types of Tokens according to FINMA FINMA = Swiss Financial Market Supervisory Authority Utility Token Payment Token Asset Token
Types of Tokens Utility Token Utility tokens are tokens which are intended to provide digital access to an application or service - also called pre-paid user fee, no implication concerning financial market regulations, but watch out: utility tokens can change in their function over the time and become payment tokens
Types of Tokens Payment Token Payment Tokens are synonymous with cryptocurrencies and have no further functions or links to other development projects. Important to know: KYC necessary, SRO membership necessary
Types of Tokens Asset Token Asset tokens represent assets such as participations in real physical underlying, companies, or earnings streams, or an entitlement to dividends or interest payments. In terms of their economic function, the Tokens are analogous to equities, bonds or derivatives, treated as securities. Important: prospectus necessary, KYC necessary (bearer shares, collective investment schemes)
Issues around Taxation Utility Token If you plan to issue an Utility token, you will need to clarify the issue of Value Added Tax (VAT). VAT is generally assessed on the sale of goods and services and since your token may be treated as a service (offered in Switzerland), it may be also taxed on this basis.
Issues around Taxation Security Token If your token falls under the category of a security token, it becomes important to assess whether there will be payments like a quasi dividend associated with it and how this dividend will be treated from perspective of withholding tax.
Issues around Taxation Income vs. Reserves Regardless of the classification of the token, if you are raising money trough an ICO or TGE and promised in the Whitepaper that you will invest the proceeds from the ICO or TGE in the further development of service, you will need to receive clarity from the Swiss tax authorities that not all proceeds of your ICO will be treated as taxable income; there is also a possibility to classify them as reserves.
Regulatory implications - Feedback from FINMA If you deal with money (also with crypto-currencies) you need to keep in mind that there are laws concerning the financial market supervision which most probably will apply to your business - you need to know where you stand. non-action-letter banking license (needed when deposits are taken from the public) license for collective schemes investment license for trading securities AML (membership in a SRO, KYC)
Setting up a Bank Account Might be challenging, in particular if the capital originates from abroad Better chances when the company will be classified as operating in Switzerland Strict observation of KYC and AML is necessary
Setting up a legal entity in Switzerland If the model is commercial a company needs to be set up Foundation Stiftung might not be the right vehicle Most common forms are LLC (GmbH) and jointstock company (AG) Setting up a company takes up to two weeks
Milestones of an ICO 1. Analyzing the White Paper 2. Tax Ruling 3. Feedback from FINMA 4. Implementation of directives included in Tax Ruling and feedback from FINMA 5. Setting-up of an entity 6. TGE
Swiss-Polish Blockchain Association www.swisspolishblockchain.org The mission of the SPBA is to support and connect start-ups in the Swiss-Polish blockchain ecosystem - and to build a bridge between Crypto Valley and Poland. We are the enabler, we link members and other contacts with the aim to build a mutually-beneficial network, exchange ideas and develop research and business opportunities in the area of blockchain and cryptographic technologies.
THANK YOU! LEXcellence Dr. K. Lasota Heller Mühlegasse 18 CH-6340 Baar E: klh@lexcellence.swiss T: +41 41 521 80 00