Switzerland has recently proposed a new law which would make the national fintech market more open, flexible and competitive. New provisions include the introduction of a ‘light-licence’ for fintech startups and the creation of a regulatory sandbox open to all. The country wants to be at the forefront of the fintech market although competition from the UK, especially post-Brexit, could challenge this position.
Finance Minister Ueli Maurer said it was crucial to press ahead with “innovation-friendly framework conditions” in the new sector in Switzerland. His ministry will set to work drafting a consultation paper suggesting changes to the banking laws by the start of next year. These would allow small companies to offer the latest digital innovations without getting bogged down in the scale of red tape that applies to large banks. “It is a legal framework that is competitive in an international context,” said Jörg Gasser, State Secretary for International Financial Matters. He added that Switzerland was breaking new ground with new conditions that could not be found in any other country. Even Britain, which is perceived by many to be leading the way in fintech in Europe, has opted for other regulatory solutions, Gasser said.
The cabinet suggested the creation of ‘sandboxes’ where start-ups can test out new ideas under controlled conditions, without the need for full regulatory supervision. This would apply to firms that have accumulated less than CHF1 million ($1 million) in funds from third parties.
Another proposal would do create a less onerous banking license for companies that provide deposit services and do not lend money. As a rule of thumb, the fintech license would be limited to firms with less than CHF100 million of outside capital, but the banking supervisor could raise this bar.
A third goal of the revised legislation would help start-ups raise money through crowdfunding. At present, they must give donors the option of withdrawing their money after seven days. That would be raised to a 60 day limit, which would give the company greater security over their funds.
The fintech movement is currently sweeping through the financial services industry, bringing the promise of deep changes within the sector globally. Among the enhancements being discussed, new digital services could bring down the cost and time of transactions and cut out many middle men.
Switzerland is vying for a slice of the global fintech pie with most other advanced economies. A number of players have set up in the so-called Crypto-valley around Zug, but the regulator and government have been criticised for slowing down further growth by their perceived sluggish response to the phenomenon.
The proposed regulatory changes will be greeted by the growing Swiss fintech industry.
The Swiss Financial Market Supervisory Authority (Finma) has sought to loosen the red tape for small innovative players. In March, it eased rules on verifying new clients by allowing video and online identification.
Finma has previously backed the idea of a regulatory sandbox and a special fintech banking license.
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