FINMA's token taxonomy: initial coin offerings and stablecoins

The initial coin offering boom and Guidance 04/2017

The years 2017 and 2018 brought a wave of initial coin offerings to Switzerland. Project teams from around the world established foundations in Zug and companies in Zurich, raised funds by issuing tokens against payment in Bitcoin or Ether and relied on the reputation of Swiss law to reassure investors. FINMA reacted first with a warning. On 29 September 2017 it published Guidance 04/2017, in which it stated that although no specific rules existed for initial coin offerings, several areas of existing financial market law could apply depending on the structure of a project: the provisions on combating money laundering and terrorist financing, banking law, the rules on securities trading and the law on collective investment schemes. The authority announced that it was investigating a number of offerings for possible breaches of supervisory law and warned the public of price volatility, early-stage project risks and fraud, particularly by providers of fake cryptocurrencies.¹

The guidance of 2017 left open the decisive question of how a given token would be classified. Lawyers in Zurich answered it project by project, often with cautious opinions that flagged uncertainties. By the end of 2018 FINMA had received 155 detailed enquiries about the regulatory framework for initial coin offerings, and it noted that Switzerland had become one of the preferred locations worldwide for such offerings.² The volume of enquiries created a practical need for a public statement of FINMA's methodology.

The ICO guidelines of 16 February 2018

FINMA published its guidelines for enquiries regarding the regulatory framework for initial coin offerings on 16 February 2018. The document became the most cited text in the history of Swiss crypto regulation and served as a model for regulators elsewhere. Its central contribution was a taxonomy of three types of token. Payment tokens are synonymous with cryptocurrencies and have no further functions or links to development projects. Utility tokens are intended to provide digital access to an application or service. Asset tokens represent assets such as a debt or equity claim against the issuer, a share in future company earnings or capital flows, or an entitlement to dividends or interest payments.³

The regulatory consequences followed from the classification. For payment tokens FINMA required compliance with anti-money-laundering regulations and declined to treat them as securities. Utility tokens were not securities if their sole purpose was to confer digital access rights to an application or service and if the utility token could actually be used in that way at the point of issue. Where a utility token also or exclusively had an investment purpose, FINMA would treat it as a security. Asset tokens were treated as securities, which triggered the requirements of securities law and, at that time, the prospectus rules of the Code of Obligations. FINMA recognised hybrid forms and announced that it would focus on the economic function and purpose of each token, examining the circumstances case by case. The guidelines also defined the information that FINMA required in order to deal with enquiries, which gave project teams and their lawyers a clear template for submissions.⁴

The taxonomy of 2018 has proved remarkably durable. It still structures the analysis of token projects in Zurich law firms in 2026, and its categories resurface in the tax practice of the Federal Tax Administration and in the vocabulary of the reform proposed in October 2025. Its weakness lies in the category of utility tokens. Very few tokens sold in 2017 and 2018 were fully functional at the time of issue, and most purchasers bought them in the expectation of a price increase. The requirement that the utility be available at the point of issue therefore tended to push many pre-functional tokens into the securities category, with the consequence that issuers structured their sales with care, often limiting them to professional investors or postponing the transfer of tokens until the platform was operational.

Payments on the blockchain and the travel rule

On 26 August 2019, the day on which it granted the first two licences to crypto banks, FINMA also issued Guidance 02/2019 on payments on the blockchain. The guidance applied the rules of the FINMA Anti-Money Laundering Ordinance on information to be transmitted with payment orders, known internationally as the travel rule, to transfers of crypto-assets. FINMA stated that its standards would be among the most stringent in the world and applied them without any de minimis threshold. Institutions supervised by FINMA could send crypto-assets only to wallets of their own customers or to other institutions subject to equivalent rules. Where a customer wished to transfer tokens to an external wallet, the institution had to establish through suitable technical means that the wallet belonged to the customer.⁵

The rule placed Swiss institutions ahead of the international standard, since the Financial Action Task Force had only adopted its own recommendation on virtual asset service providers in June 2019. For Zurich crypto banks the rule was a burden and a marketing argument at the same time. It increased the cost of each transfer while allowing the banks to present themselves to institutional clients as the most thoroughly regulated counterparties in the market. The threshold for the identification of customers in exchange transactions involving virtual currencies outside a permanent business relationship was later reduced from CHF 5,000 to CHF 1,000, in view of the high money laundering risks of such transactions.⁶ The general framework of anti-money-laundering law is discussed in Part I of this book.

The stablecoin supplement of 11 September 2019

From the middle of 2018 FINMA observed a steady increase in projects for so-called stablecoins, tokens whose value is linked to a currency, a commodity, real estate or securities. On 11 September 2019 it published a supplement to its ICO guidelines devoted to these projects. FINMA confirmed that it would apply its technology-neutral approach and focus on the economic function and purpose of a token according to the principle of “same risks, same rules”. Depending on the type of backing, a stablecoin could trigger requirements under anti-money-laundering, securities, banking, collective investment scheme or financial market infrastructure law. A coin linked to a fiat currency with a fixed redemption claim at par would, for example, typically constitute a deposit under banking law.⁷

The same press release disclosed that the Libra Association, the consortium initiated by Facebook with its seat in Geneva, had asked FINMA for an assessment of its project. FINMA's preliminary view was that a project of that kind would require a licence as a payment system under the Financial Market Infrastructure Act, with additional requirements for capital, liquidity, risk distribution and the governance of the reserve. FINMA added that the returns and risks associated with the management of the reserve would have to be borne entirely by the Libra Association.⁸ Libra, later renamed Diem, was never launched from Switzerland. The episode nevertheless showed that FINMA was prepared to apply existing infrastructure law to a global stablecoin, and it put Swiss regulation on the map of the international debate on stablecoins.

Guidance 06/2024 on stablecoins and default guarantees

The question of stablecoins returned in 2024. By then several Swiss issuers had launched franc-denominated and other fiat-linked tokens. Most of them avoided the need for a banking licence by relying on an exemption in the Banking Ordinance for deposits secured by a default guarantee from a bank. On 26 July 2024 FINMA published Guidance 06/2024, in which it observed that such guarantees were commonly used and set minimum requirements for them. It also drew attention to increased risks in the areas of money laundering, terrorist financing and the circumvention of sanctions, as well as reputational risks for the Swiss financial centre.⁹

According to the guidance, a default guarantee must give each customer an individual claim in the event of the issuer's bankruptcy. It must cover the full amount of the deposits, which may not exceed the guaranteed amount, and depositors must be able to invoke it without unnecessary formal or material obstacles. The guaranteeing bank may rely only on defences that arise by law, which excludes defences created by the guarantee agreement itself. FINMA also stated that stablecoin issuers are generally required to verify the identity of all persons holding their stablecoins, including purchasers on the secondary market, and that supervised institutions issuing stablecoins must implement contractual and technical transfer restrictions to avoid anonymous transfers.¹⁰

The requirement to identify every holder was the most controversial element. A stablecoin that can circulate only among identified wallets loses much of the openness that makes public blockchain tokens attractive for settlement and payment. Swiss issuers therefore faced a competitive disadvantage against issuers in the European Union and the United States, whose tokens could circulate freely on public blockchains after the initial sale. The reform of 2025 addresses this point directly, as section VI explains.

Notes

FINMA, “FINMA publishes ICO guidance”, 29 September 2017, https://www.finma.ch/en/news/2017/09/20170929-mm-ico/. The release acknowledged the innovative potential of blockchain technology while restating FINMA's technology-neutral and principle-based approach. ↩
FINMA, “Developments in FinTech”, dossier, https://www.finma.ch/en/documentation/dossier/dossier-fintech/entwicklungen-im-bereich-fintech/. The dossier observes that enquiries in the first half of 2018 concerned mainly the issuance of tokens, while questions about secondary trading increased in the second half of the year. ↩
FINMA, “FINMA publishes ICO guidelines”, 16 February 2018, https://www.finma.ch/en/news/2018/02/20180216-mm-ico-wegleitung/. The release quotes FINMA's then chief executive Mark Branson: “blockchain-based projects conducted analogously to regulated activities cannot simply circumvent the tried and tested regulatory framework.” ↩
FINMA, “FINMA publishes ICO guidelines”, 16 February 2018, https://www.finma.ch/en/news/2018/02/20180216-mm-ico-wegleitung/ (on the treatment of each token category, hybrid tokens and the information FINMA requires for enquiries). ↩
CapLaw, “FINMA Grants Banking Licenses to New Swiss Crypto Banks, Introduces New Strict AML Rules regarding Payments on Blockchain”, 2019, https://caplaw.ch/2019/finma-grants-banking-licenses-to-new-swiss-crypto-banks-introduces-new-strict-aml-rules-regarding-payments-on-blockchain/. The article explains that third-party wallet holders had to be onboarded as clients where the ownership of an external wallet could not be established. ↩
Wicki Partners, “Die teilrevidierte Geldwäschereiverordnung-FINMA wurde veröffentlicht”, https://wickipartners.ch/news/die-teilrevidierte-geldwschereiverordnung-finma-wurde-verffentlicht. The note also describes the requirement for DLT trading facilities to operate automated transaction monitoring systems. ↩
FINMA, “FINMA publishes ‘stable coin’ guidelines”, 11 September 2019, https://www.finma.ch/en/news/2019/09/20190911-mm-stable-coins/. ↩
FINMA, “FINMA publishes ‘stable coin’ guidelines”, 11 September 2019, https://www.finma.ch/en/news/2019/09/20190911-mm-stable-coins/ (on the Libra enquiry and the payment system licence). ↩
FINMA, “FINMA publishes guidance on stablecoins”, 26 July 2024, https://www.finma.ch/en/news/2024/07/20240726-m-am-06-24-stablecoins/. The guidance was published in English, German, French and Italian. ↩
Schellenberg Wittmer, “FINMA Guidance 06/2024 on Stablecoins”, newsletter, https://www.swlegal.com/en/insights/newsletter-detail/finma-guidance-062024-on-stablecoins/. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.

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Dr Alexander Ressos, TEP

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