In Switzerland, the travel rule of FINMA, the Swiss Financial Market Supervisory Authority, subjects cryptocurrency transfers to the same information transmission rules as a conventional bank transfer. It is set out in supervisory guidance 02/2019 of 26 August 2019 and targets institutions supervised by FINMA. In the absence of a system capable of transmitting this information on the blockchain, they may then only send crypto to the external wallets of their own identified clients.
This detail page answers a single question: what the travel rule requires for a crypto transfer, and of whom. Token classification and the overview of supervision are covered in our page FINMA and cryptocurrencies.
What is the FINMA travel rule?
The travel rule refers to a simple idea: the information about a payment travels with it. FINMA applied it to the blockchain in its guidance 02/2019, entitled "Payments on the blockchain".
This text does not create a new law. According to its 2019 annual report, FINMA explains that it applies the existing Swiss rules on the transmission of information in payment transactions to the blockchain as well. It invokes the principle of technology neutrality: the rule does not change with the medium.
The reason given lies in the very way crypto works. According to FINMA, the anonymity inherent in the blockchain entails increased money laundering risks.
What data must accompany a crypto transfer?
FINMA's answer fits in one sentence: the same as for a traditional payment. It specifies that no relaxation is provided for compared with conventional payment transactions when it comes to combating money laundering.
The FINMA pages consulted do not detail the list of fields to be transmitted. That list falls under the Swiss rules on payment transactions, to which the text of guidance 02/2019 refers, published by FINMA on its page dedicated to Fintech.
This information is part of a broader framework. The Anti-Money Laundering Act (AMLA) imposes due diligence obligations on financial intermediaries, such as identifying beneficial owners. FINMA and the self-regulatory organisations (SROs) ensure that they are complied with.
Who must collect this information?
Guidance 02/2019 is aimed first and foremost at institutions supervised by FINMA. These are entities that hold a licence from the authority, notably banks, securities firms, insurers, fund management companies, collective investment schemes, stock exchanges or multilateral trading facilities.
Crypto players are among them. At the end of August 2019, FINMA granted a banking and securities dealer licence for the first time to two financial service providers active in the blockchain. It attached conditions and obligations to these licences.
The scope of the AMLA is broader than that of licence holders. According to FINMA, providing wallets, exchange, trading in virtual currencies such as bitcoin and operating a payment system are subject to it. These players must join an SRO. The details of the possible statuses are set out in our page on the FINMA crypto licence.
What does the travel rule change for a transfer to a private wallet?
For a client, the main consequence concerns external wallets. These are addresses that are not held by the institution itself: a private wallet is one of them.
FINMA has provided for an exception as long as no system makes it possible to transmit the information on the blockchain. In that case, a supervised institution may only send cryptocurrencies or other tokens to the external wallets of its own clients, who have already been identified. It may only receive them from those same wallets.
| Transfer from an institution supervised by FINMA | What the exception described by FINMA in 2019 provides |
|---|---|
| Sending to the client's own external wallet, already identified | Permitted |
| Receiving from the client's own external wallet | Permitted |
| Sending to a third party's external wallet | Not covered by the exception |
| Receiving from a third party's external wallet | Not covered by the exception |
In practice, a client can transfer their crypto to their own private wallet, once identified. A direct transfer to another person's private wallet does not fall within this exception. The pages consulted do not say how the institution verifies that the wallet actually belongs to its client.
Why is Swiss practice considered strict?
FINMA itself describes its practice as one of the most stringent in the world. According to its 2019 annual report, this established practice applies without exception. The anti-money laundering rules apply to the blockchain just as they do to traditional payment transactions.
The exception for external wallets does not relax the rule. It stems from the absence, in 2019, of a system for transmitting information on the blockchain. It restricts transfers to the wallets of clients already identified by the institution.
How to check the status of a crypto provider?
Before entrusting crypto to a platform, an individual can check its status on the FINMA website. The "Authorised institutions" section lists licence holders. A wallet or trading service subject to the AMLA must, for its part, be affiliated with an SRO.
The FINMA crypto warning list complements this check. It flags providers that may be operating without a licence, but it is neither exhaustive nor always up to date.
Key figures
- 02/2019: number of the FINMA guidance "Payments on the blockchain".
- 26 August 2019: date of the last modification of this guidance displayed by FINMA.
- 2 blockchain providers licensed as a bank and securities dealer at the end of August 2019.
What we don't know yet
Several points remain open in the sources consulted. The FINMA pages do not list one by one the data to be transmitted for a crypto transfer. Nor do they say whether a system for transmitting information on the blockchain is now recognised, which would put an end to the exception described in 2019.
FINMA's Fintech page still displays guidance 02/2019, with a last modification on 26 August 2019. The sources consulted do not specify whether SROs apply the same exception to their members, or how ownership of a wallet is verified. Other articles on the oversight of crypto players are gathered in our section crypto regulation and taxation.
