Switzerland Authorities Impose Anti-Money Laundering Policies on Crypto

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In Brief
  • Switzerland Regulatory Body FINMA now mandating extra measures for digital asset providers their platforms are not used for criminal activity.

  • The primary criminal activity that the new legislation is trying to combat is money-laundering, after a series of major scandals in Switzerland

  • A limit of 1000 Swiss francs per month without identification required is being imposed on all crypto institutions

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In an effort to combat money laundering, Swiss authorities are seeking to limit the transaction amount threshold for cryptocurrency transactions to 1000 Swiss francs, after which identity of the party involved in the transaction is required.

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The Swiss Financial Market Supervisory Authority (FINMA), which serves to protect all bank users, policyholders and investors from fraudulent service providers, is making it compulsory for digital asset providers to take greater measures to ensure that their platforms are not used for criminal purposes. The regulatory body, via a letter from Christoph Kluser, who supervises the parabanking system, would like to see further measures taken as part of a wider effort to combat money laundering and terrorism funding. Recently, Switzerland has seen multiple money laundering cases arise recently, including two graft scandals, the Venezuelan PDVSA, and 1MDB, and has sought to revise a 24-year-old law to address some of the vulnerabilities that have allowed money laundering to thrive.

Cryptocurrencies appear to pose an additional risk, with FINMA recently denying Bitcoin Suisse, a crypto broker, a banking license due to concerns over money laundering. FINMA considered the money laundering defense mechanisms of Bitcoin Suisse as having indications of weaknesses.

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FINMA Highlights Bitcoin ATMs

FINMA is looking to take a more rigorous approach with limitations on cryptocurrency-based transaction amounts than it does with fiat currency. The watchdog is now imposing a limit of 1000 Swiss Francs per month to all cryptocurrency transactions, after which intermediaries need to identify their clients in bitcoin and other cryptocurrencies. The regulation regarding the amount was passed earlier, after consultation with industry players, but the monthly constraint has raised consternation, as industry business models are now going to be affected.

Keeping in mind that linked transactions are most readily subject to anti-money laundering legislation, not individual transactions, the regulation has taken the industry by surprise. As an indication of the reach of the crypto industry in Switzerland, there are over 85,000 merchants in Switzerland who accept crypto as a valid payment method, and more and more Swiss banks are accepting cryptocurrency, including SEBA bank and BBVA. The new FINMA regulation seeks to clamp down the use of crypto ATMs, which according to FINMA, drug dealers use as payment systems. Switzerland has 130 Bitcoin ATMs, with Zurich and Lausanne leading the way with 38 and 20 respectively.

In comparison, intermediaries are only required to identify their clients from 5000 Swiss francs upward on currency trades, and 15000 francs on all other cash transactions.

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