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US or Swiss approach for EU crypto regulation?

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The EU has provided little guidance and is yet to establish a regulatory framework, but other jurisdictions could provide direction

The European Central Bank (ECB) recently said cryptocurrency regulation is outside their mandate. This has led to questions as to which body would provide a regulatory framework when it is inevitably introduced.

As it stands it is unclear what approach European regulators will take; while European regulatory bodies have not been shy to insist that cryptocurrencies are not a wise investment, there has been a dearth of guidance provided to offer clues on their approach going forward. The Swiss Financial Market Supervisory Authority (Finma) is one of the few European regulators that has offered wide guidelines for initial coin offerings (ICOs), which could shape crypto regulation for the entire continent.

Finma released its guidance on ICOs last September and since then the Swiss ICO market has flourished. Swiss economics minister Johann Schneider-Ammann said last month that he wanted Switzerland to become “the crypto nation”, and four of the world’s ten biggest ICOs ever have been based in Switzerland.

From January to October last year, only the US raised more in ICOs than Switzerland, two countries that have arguably the most advanced regulation in place. The concern for EU-wide regulators is that providing regulation could legitimise an industry they disapprove of and arguably want investors to shy away from.


Two clear choices

Joshua Ashley Klayman, Morrison & Foerster blockchain and cryptocurrency lawyer, said that the guidance from Finma looks very different to the US and therefore presents two clear choices for regulators in other jurisdictions.

Swiss guidance has outlined three different types of tokens – coins issued through an ICO on a separate blockchain to bitcoin -- that are each regulated in a different manner. Payment tokens, those that have no further...