FINMA's Crypto Guidance: Principles Over Prescription in Swiss Financial Regulation

In February 2018, FINMA published its Guidelines for enquiries regarding the regulatory framework for initial coin offerings — a document that became, almost immediately, the most referenced piece of crypto regulatory guidance in the world. The ICO guidelines were not a regulation. They did not create new law. They explained, with unusual clarity and analytical rigour, how Swiss financial law applied to different types of token — and what regulatory consequences followed from that classification. The document’s influence extended far beyond Switzerland’s borders, shaping how regulators in other jurisdictions thought about token classification and the relationship between blockchain technology and existing financial law.

Understanding FINMA’s approach to crypto regulation requires understanding what it is and what it is not. It is a principles-based regulatory methodology that applies existing Swiss financial law to new technologies through careful functional analysis. It is not a crypto-specific regulatory code, and it is not a special zone of regulatory permissiveness. FINMA’s guidance tells market participants not what they are free to do, but what they are required to do — and it has been willing to take enforcement action against firms that misread its guidance as permission to avoid regulatory obligations.

The 2018 ICO Guidelines: Three-Category Token Classification

FINMA’s February 2018 ICO guidelines established a three-category classification of tokens that has since become the analytical foundation of crypto regulatory frameworks globally. Payment tokens are tokens used as a means of payment — cryptocurrencies in the narrow sense, with no additional functions. Utility tokens provide digital access to applications or services on DLT-based infrastructure. Asset tokens represent assets such as participations in companies, earnings streams, or entitlements to dividends or interest payments — analogous to equities, bonds, or derivatives.

The regulatory consequences of each classification follow from Swiss financial law. Payment tokens are subject to AML/CFT requirements under the Anti-Money Laundering Act — entities dealing in payment tokens must be affiliated with a self-regulatory organisation or directly regulated by FINMA. Utility tokens with no investment character typically fall outside financial market law entirely, provided they are not marketed as investments. Asset tokens are subject to securities law to the extent they meet the definition of a security under the Swiss Code of Obligations and the Stock Exchange Act.

The power of this framework lies in its functional character: what matters is what the token does economically, not what its technical architecture looks like or what name its issuer gives it. A token issued as a “utility token” but marketed as an investment opportunity and promising returns from the issuer’s business is an asset token under FINMA’s analysis and attracts securities regulation regardless of its label. This functional approach was more sophisticated than many early national regulatory positions, which either categorised all tokens as securities (the SEC’s initial approach) or struggled to classify tokens that combined payment and investment characteristics (the FCA’s early position).

The FinTech Licence: 2019

Switzerland’s innovation-friendly regulatory environment was reinforced by the introduction of the FinTech licence in 2019 — a new category under the Banking Act allowing firms to accept public deposits up to CHF 100 million without requiring a full banking licence, provided they do not undertake maturity transformation (borrowing short, lending long). The FinTech licence was specifically designed to accommodate the deposit-taking that stablecoin issuers, crypto exchange operators, and payment service providers undertake without bringing them within the full scope of Swiss banking regulation.

Several crypto-adjacent businesses have used the FinTech licence to operate legally while keeping their compliance burden proportionate to their actual risk profile. The licence’s CHF 100 million deposit limit means it is most suitable for smaller operators; larger stablecoin issuers or exchanges handling significant customer assets require a banking licence or alternative authorisation.

FINMA’s Approach to DeFi and Staking

FINMA has engaged with DeFi through its standard analytical methodology: identify the economic functions being performed, and apply existing law to those functions. In its 2021 and subsequent supervisory communications, FINMA acknowledged that DeFi protocols present regulatory challenges when they operate without identifiable legal entities — the standard Swiss regulatory obligation framework assumes an identifiable, legal-person subject of regulation.

For DeFi protocols that have identifiable operators or governance structures — including DAOs with Swiss legal foundations or DeFi companies incorporated in Switzerland — FINMA has applied standard analysis: if the protocol facilitates financial services (trading, lending, asset management) it must satisfy the corresponding regulatory requirements. The absence of a traditional corporate structure does not, in FINMA’s view, create a regulatory exemption; it creates a harder identification problem.

On staking, FINMA has treated staking-as-a-service — where a platform stakes crypto assets on behalf of clients and earns and distributes staking rewards — as an asset management function requiring appropriate authorisation, where the scale and structure of the service brings it within the scope of the Collective Investment Schemes Act or the Financial Institutions Act. FINMA has been more permissive for individual staking arrangements where the client retains direct control of their private keys.

Supervisory Communication on NFTs

FINMA addressed NFTs through public communication rather than formal guidance, confirming that NFTs must be assessed individually against Swiss financial law — an NFT that represents a fractional interest in a financial asset is an asset token subject to securities regulation; an NFT that represents a digital artwork with no financial characteristics falls outside financial market law. This consistent application of functional analysis to new token types reflects FINMA’s institutional culture of applying existing law carefully rather than issuing bespoke rules for each technological novelty.

Comparison with FCA and SEC Approaches

The contrast with the FCA and SEC is instructive. The SEC under its pre-2025 leadership applied a presumption that most tokens are securities under the Howey test, creating significant legal uncertainty for utility and payment token issuers and resulting in enforcement actions that the industry considered aggressive. The FCA’s approach was more cautious — distinguishing between exchange tokens, security tokens, and e-money tokens — but its guidance documents were less analytically developed than FINMA’s and its engagement with industry was less collaborative.

FINMA’s approach attracted crypto companies to Switzerland because it offered a genuine answer to the question: “What must I do to operate legally?” rather than the regulatory ambiguity that characterised other jurisdictions. The Swiss no-action letter process — through which FINMA would confirm its regulatory assessment of a specific business model — gave firms actionable certainty that made legal compliance planning possible. This combination of analytical clarity, willingness to engage, and proportionate application of existing law to new technology created the regulatory conditions in which Crypto Valley could develop, without requiring Switzerland to create a regulatory special zone or exempt crypto businesses from normal financial market oversight.