Swiss financial watchdog FINMA just published their latest guidance regarding regulatory requirements financial service brokers under FINMA’s wing should comply with in case they are looking to utilize blockchain technology in a legal and accepted manner.
The Financial Market Supervisory Authority of Europe’s most popular banking region FINMA has previously published a regulatory treatment of initial coin offerings (ICOs) back in April 2017, citing that a selected number of ICOs could be treated as securities according to Switzerland’s financial laws.
While even some of the most popular ICOs back then couldn’t be lucky enough to get the security labeling, today it doesn’t seem to make a big difference whether an ICO is in the “whitelist” or not, as ICOs are replaced with STOs (Security Token Offering), and the overall global regulatory wave on cryptocurrencies has evolved so much so fast, that blockchain is being accepted, used, and promoted by central banks and governments nowadays.
So what exactly does the new guidance from FINMA propose?
FINMA’s main concern is the money laundering and financing of terrorist acts that hide behind the anonymity some blockchain-powered platforms offer to the global trade market. Hence’s Switzerland has always applied the Anti-Money Laundering Act to every single blockchain-related company operating within its borders.
According to the new guidance, companies directly or indirectly engaged with blockchain technology are obliged to provide transparent and accurate information identifying their customers, beneficial owners, create risk-focused analyses of business relationships, as well as to file a report with the Money Laundering Reporting Office of Switzerland (MROS), if there is the slightest suspicion of money laundering.
Furthermore, Article 10 AMLO-FINMA requires all companies operating in the financial sector to disclose information regarding suspicious clients with full transparency, including but not limited to their respective payment orders.
FINMA suggests that there is currently not one single blockchain-powered platform that can reliably transfer identification data for payment transactions, neither in local nor in the international blockchain scene, and therefore, strict financial regulations must be followed by the companies/providers of such telecommunication protocols.
Similar to traditional financial service providers, blockchain-powered legal entities that fail to be subject to Article 10 AMLO-FINMA will be simply released of their right to operate within the country.
The new guidance also suggests that financial institutions supervised by FINMA will not be able to perform any kind of monetary transactions if not following regulations.
Cryptocurrency transfers on blockchain platforms will be only available from and to external wallets that belong to the respective institution’s clients. Of course, their ownership must be registered, proven, and transparent to FINMA.
Transactions between clients that operate under the same institution are also allowed under specific guidance, and as long as the full process is so transparent it would be nearly impossible to perform money-laundering practices.
Finally, any client that wants to perform transactions that involve digital currencies, whether that’s fiat to crypto, crypto to fiat, or crypto to crypto, where an external wallet is involved, the client’s relationship with this specific wallet must be again registered and proven using technical means.
Now, on hand, it’s kinda good to hear that big monetary policymakers such as FINMA are actively involved in regulating cryptocurrencies and promoting the lawful usage of blockchain technology.
On the other hand though, and let me be clear here, Switzerland might be the capital of chocolate, gold bars, and banking institutions, but if there is one rumor that tops all regarding Milka’s country, it is that if you want to launder money, you have to open a bank account in Switzerland, where no questions asked, and everyone acts a fool when asked about these accounts.
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