Xapo, a prominent Bitcoin wallet platform and solutions provider successfully obtained a conditional approval from the Swiss Financial Market Supervisory Authority, hereinafter FINMA, this week.
The approval of FINMA to financial service providers in Switzerland is equivalent to that of BitLicense to the New York-based Bitcoin exchange. Companies willing to engage in the Swiss financial market are required to be authorized by FINMA in order to provide financial service in the country.
While there are many types of authorizations granted by FINMA, the most common set of approval is the financial activity license, which is applicable to Bitcoin startups offering services or infrastructure to digital currency users. The possession of this license serves as evidence that a startup or a company is in strict compliance with various policies including Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
FINMA states:
“Financial intermediaries directly subordinate to FINMA DSFIs must also be authorized. Once this initial authorization has been granted, supervision is limited to ensuring that anti-money laundering due diligence requirements are being met.”
What this means for the Swiss Bitcoin industry
Similar to the United States and China, the Bitcoin industry in Switzerland is shaping up to be a properly regulated market, wherein Bitcoin exchanges, service providers or infrastructure developers are in strict compliance with local regulations.
Being compliant with regulations or policies that weren’t designed specifically for Bitcoin or other digital currency services can be difficult and more importantly, expensive. Some licenses in countries similarly to the states such as New York can cost over $100,000 for companies at the size of Xapo, with a global and active user base.
Although legal costs take up the vast majority of the capital allocated in obtaining financial licenses, a significant portion of it is used in the development of applications. In some cases, several changes to applications, services or platforms have to be made in order to meet the expectations of financial regulators, as Xapo founder and CEO Wences Casares states:
“When obstacles arose, FINMA invariably suggested solutions. We immediately accepted their suggestions when we could and, in other cases, modified or developed products to meet regulatory requirements. It was this product development, not bureaucratic indifference, that added weeks and months to the application process. Moreover, the tools that Xapo was required to develop will ultimately benefit our users by ensuring effective oversight of our company.”
For the long-term prosperity of the Swiss Bitcoin industry, the efforts of major players like Xapo to remain compliant with local regulations despite their complexity of impracticability are crucial. If an increasing number of Bitcoin companies follow the road map of Xapo to establish themselves as legitimate and regulated Bitcoin ventures, it will fasten mainstream adoption of the digital currency.