With countries likes China and South Korea are cracking down on cryptocurrencies and initial coin offerings (ICOs) activities, Switzerland is quickly emerging as the favored location for entrepreneurs to host their crypto businesses and conduct token sales.

Switzerland is already known for being a global blockchain and cryptocurrency hub, aided by supportive regulations, the business-friendly environment, advanced infrastructures and the large pool of highly-educated and highly-skilled finance and tech talents.

This year, the country hosted four of the six largest ICOs, as of September 2017, according to PwC Strategy& report, and that number is growing fast. And while the country seeks to further grow its blockchain industry and foster blockchain and cryptocurrency innovation, the Swiss Financial Market Supervisory Authority (FINMA) remains wary of ICOs and cryptocurrencies.

Mark Branson, CEO of FINMA, Photo: ©Philipp ZInniker

“Switzerland has positioned itself as a hub for blockchain related activities. This success will be maintained if Switzerland welcomes innovative and serious projects,” Mark Branson, CEO of FINMA, said in a recent interview with le Temps.

But while blockchain technology has given birth to great projects, it has also opened the door to fraudulent activities.

“Our work consists in distinguishing the innovations that deserve to have a chance for success from the ones that are fraudulent,” said Branson.

“We have cracked down on a crytocurrency project that was relying on nothing and are currently examining others. Actors who are looking to make money rapidly in an illegal manner will be stopped. But investors also must be prudent.

“We are mobilizing more and more of our existing resources towards virtual activities that are subject to strong craze.”

Branson said FINMA is constantly monitoring the ICO sector and will closely examine the cases which it believes are potentially problematical. “With experience, we will develop a practice that will be known by players in this industry.”

Branson added that not every cryptocurrency business are required to have a license from FINMA, but some players need to be supervised to help prevent money laundering. Others must be regulated by current rulings on investment funds, banking, or securities.

FINMA issued guidance on ICOs in September shortly after the authority shut down the provider of an alleged fake cryptocurrency.

The QUID PRO QUO Association had provided so-called E-Coin for more than a year and had amassed funds of at least CHF 4 million from several hundred users.

“Unlike real cryptocurrencies, which are stored on distributed networks and use blockchain technology, E-Coins were completely under the providers’ control and stored locally on its servers,” FINMA said in a release.

“The providers had suggested that E-Coins would be 80% backed by tangible assets, but the actual percentage was significantly lower. Moreover, substantial tranches of E-Coins were issued without sufficient asset backing, leading to a progressive dilution of the E-Coin system to the detriment of investors.”

At the time, FINMA also said it was investigating around a dozen other possible fraud cases.

The move puts Switzerland in line with other authorities around the world that are casting a sharper eye on ICOs and cryptocurrencies. Earlier this week, the UK and other European governments announced that they are cracking down on cryptocurrencies amid growing concerns that these can be used for money laundering and tax evasion.

Under the proposed plan, traders will be forced to disclose their identities and cryptocurrency exchange platforms will be required to carry out due dilligence on customer and report suspicious transactions. The rules are expected to come into effect in the coming months, according to the Guardian.

Featured photo: © Philipp Zinniker via FINMA