Future of the Swiss SRO Regime

Transcript

So we have no >> nine attendees. I can see that. >> Yeah. Good afternoon everyone. Welcome to IML working group um bi-weekly call. Today we decided to do the call publicly available. Normally it's an internal call for the working group. But as we have this uh very important topic uh we decided to um to give the possibility our guests also to join us.

And um my name is Yakatina Anthony. I am co-chairing the working group with Chris and Maria. And uh today I have a really great panelists um my colleague Maxim who is also board member of Crypto Valley Association as well as I am also uh we have Alletto who represents MML and Martin I think Martin represents his um um new new firm right Martin.

So >> yes, >> good. Uh so I think I will wait for a couple maybe seconds more. We have 20 people now uh in the room. 27 28. So let me quickly start uh and um if more people join will be great but we already have a good number of attendees. So we all know that federal council launched a consultations in October on 22nd and uh proposing of the changes to the financial institutions act act and u we know that they would like to

introduce uh two new type of license it's a payment institution uh instrument license and a cryp crypt institution Um officially the goal of the consultation is to support innovation and strengthen Switzerland as a financial center. But we all know that picture on the ground looks a bit different. Switzerland has already lost a lot of fintech projects and uh crypto startups.

uh young companies um are really struggling with some regulatory requirements and they are often too heavy and too difficult to manage in practice. That is why today we would like to discuss uh what really the new proposed uh changes means for SRO supervised companies. Um the consultation also include a new approach to certain certain type of stable coins which uh will also impact uh how the IML and operational requirements requirements uh will be um

uh set up and uh it can affect also token issuers, custodians and trading venues and it raise a lot of question questions so how the tokens will be classified uh going forward and um in our one hour call I will ask and Martin to discuss the practical impact of proposed the uh pro proposal and uh Maxim will also share insight uh to the um meeting which he attended earlier this week with state secretariat for international

finance. I think that um we can start and uh my first questions will be to ret what is basically uh advantage of esole regime now in Switzerland and how uh it will impact our members of eseros going going in the future because we have a lot of um companies who operates in crypto they have a different setup up. But does it really mean that next year they all have to be uh regulated by FINMA and uh what is the you know risk time frame and uh

guarantee that in a year time SRO model still will exist with the FINMA supervision and uh it's it has some guarantee for the market that it will still available. So the company each company which is SER regulated will still can make business but under FINMA. >> Thanks a lot. Many of >> so sorry I didn't suggest you to introduce yourself. Yes I was so excited about topic. So yes let me ask you first and Martin Maxim just say a couple words about yourself.

>> Uh thanks a lot Katrina. I'm uh also the head of the crypto associations regulatory working group and uh apart from that as you told I'm a partner with MLA legal a Swiss law firm a bigger one and they're also co-heading our regulatory fintech DSD team actually and I'm happy to be here. >> Great Maxim. >> Hi my name is Maxim. I'm one of the board members of the crypto valley association and right now I am the chair of the consultation working group which is a temporary uh structure in order to provide consolidated feedback to the

regulator in regards to this new law. Besides that, I am a compliance consultant working uh for my own company helping um companies from Switzerland and abroad to become regulated in Switzerland mostly under SRO regime. So for me this topic is also very close to home. >> Thank you Martin. >> Uh hello everybody. My name is Martin Leby. Uh I am uh co-chairing the practice working group on dispute regulation at crypto valley. Um I met partner Ghana Cook. Ghana Cook is an international law firm focusing on crypto and financial services. So we have offices in the UK, US, Germany and the rest of the world. Happy to be here.

Thanks for inviting me. >> Great. So uh yes as as we already discussed I would like to give the floor to and um just couple um ideas we have uh today uh people at this call representing banks I can see we have people from fintech um licensed entities and also Seros so maybe it's just give you a bit of um feeling what we need to tell I hope we u I don't think we have any FINMA representative but if we have them here it will be good we can ask them direct questions but I think it's more like market participants

welcome >> thanks a lot I think yeah you asked about today's esro membership landscape and then how it develops what the advantages are and how it develops in this new framework I mean today it's mostly the esro framework work affects mostly players which work with payment tokens in the Swiss legal framework. Utility tokens are basically unregulated and security tokens are subject to the securities regulations in Switzerland.

And uh most of these models refer to models where the SRO members uh work with segregated wallets per client because if they start pooling payment tokens then they would already be under the fintech license unless they have certain exemptions like a bank default guarantee or settlement accounts. And these are quite many players today. You have uh you have actually uh if you do custody on a segregated basis, you can uh operate ATMs, you can have uh crypto vouchers, do money exchange, do facilitate transfers in in crypto. So

it's a uh quite broad population who can be as member today the which is uh from a point of view now if we compare already to the new regime where which introduces actual license regimes being supervised by FINMA the today's esro regime has the big advantage at least from the market participants point of view that it really focuses on one of the main risks of the business models which is AML risk and anti-terrorism and fining risks and sanctions applies applies anyways um apart from that uh a member today has

much freedom whereas in a licensed regime like the new regime but also the other existing FINMA licenses it's not only AML in focus but it widens you have to uh it's a credential license. FINMA supervises you in respectively uh focuses on all aspects of your business. You have to have a viable business model. You have to comply with capital liquidity and risk requirements. You have corporate governance uh requirements, how you disclose, you have uh afterwards certain conduct duties. though it's much more comprehensive and and uh in the end

also more costly to to run such a licensed business. uh this said obviously if we also look now from a comparative point of view to the EU or other countries especially in the EU you already need such full licenses for most of these activities in the EU and this obviously explains in the end what today's big advantage is of the Swiss model with the esro membership it's a much more lowlevel uh supervision but nevertheless covers I would say some of the most important or biggest risks like AML and terrorism financing but leaves alone the

members a little bit with governance and with capital and whatever there maybe um it's uh at least not from a supervisory point of view regulated however as I've said such players work with usually segregated wallets per client and there they have already the protection from the Swiss bankruptcy and debt collection law because it says as long as you hold them readily available and in a segregated way then it's bankruptcy remote in the end. So also there we have already a quite good protection for our clients.

That's maybe one of the biggest advantages and if we would move then to the new setup as I've explained the duties expand uh we get on a Finma what call it level playing field or comparable regulation to also especially the EU regulation mika there but also other countries and we would have a regime which would work more or less as likely as the others. And then the question is why should anyone come to Switzerland anymore if they can reach with the Mika license 450 EU inhabitants whereas

Switzerland has a 9 million market. So this uh from the other side shows that actually it's at least according to my view very important to keep uh this attractive framework in Switzerland with SRO's or maybe SRO plus whatever we uh play a little bit there around uh as an important advantage for the Swiss financial and crypto market. Um yes um I think that it's really in one hand we understand that FINMA would like to have the more transparent regulation but in another hand in practice for example if I am a

small boutique uh exchanging crypto really I need to have all this um requirements and uh why uh don't we have like the um gradation like some initial you know minimum business can be still regulated by SEO if you have something more substantial when you really have to guarantee some protection to the clients then it can move to next level and um I would like us to be proactive um let me uh ask uh to um let Kasim Andra to speak because he raised a

Sorry was a mistake. I'm so sorry. >> Okay, no problem. Then um my question is to Maxim. uh I know that we uh and I'm part of this actually uh we now trying to u provide our feedback to the regulator and uh you had chance to represent crypto valley at the uh recent uh meeting with CIF on Monday. Uh so maybe you give us a bit of uh your like u out like provide us with outcome of this meeting and your ideas uh what shall we do as a crypto going forward?

What should be our position? >> Sure happy uh to do so. Um the meeting in burn with the state secretary of international finance questions uh was quite an interesting event. There were around 50 participants and in the audience there were the SRO's uh BQF and Sopit and and u few more of those represented but also um associations and organizations like the Crypto Valley Association. So the the blockchain federation, the Bitcoin association Switzerland, the blockchain um association, Lugano uh was there and

um a few fintech um focused organizations like the Fintech Alliance and the Fintech Institute and um it started with a quick presentation from CIF and it was quite short quite high levels So I think like maybe five or six slides in total where they gave just a brief overview of uh the intended structure and then they opened up for a Q&A and here where things really went crazy. Um most of the people were talking for 5 minutes and longer to not ask a question but really rant about the intended uh idea. So I would say that was not very uh

productive and there was no clear outcome. But in summary, the the outcome from the whole event was that they understand that they have not covered all possible aspects and all possible scenarios of uh regulation and the financial or financial markets and crypto markets and they are very open to receive proper structured and productive feedback to to their work. So for us that would mean we need to really align and present them proposals on how to fix the missing gaps in the proposed uh law.

In total, the the law suggestions are not bad, but they're missing a clear uh few elements. And I asked only after the event the clear question, what about if I have a little money exchanger on the train station where someone can come and and bring 100 Swiss Franks uh to me and they want to exchange that to 100 euro. Can an SRO do that? And they said, "Yeah." And okay. And what about the exact same situation but 100 Swiss Frank worth of Bitcoin? Does that now need to go for a FINMA crypto institute license or uh what's what's the plan? Or what about third-party payments to for want

to send those 100 Swiss Frank worth of in fiat or crypto terms abroad? Is that now a payment instrument institute or a crypto institute or a bank or what else? They and the answer from CIF and from two separate persons at CIF was that that was not on the radar. That was not part of the U conversation. They were focusing on the higher level the real financial instrument type of um businesses the the banks and security broker dealers fintech license and the big big players and the small problems were kind of left unticked. However,

with the current wording it seems those could be gone but that's what was not the intention. So the good news here is we are not shutting down SRO at uh as of now and here it is really important that we really provide clear feedback where we see the differences between the proposed institutes and SRO and where we can cut put in borders where can we provide more clarity into what SRO can do or should do in the future and what would be the benefits of the other licenses.

>> Um thank you Maxim. I think that um for everyone who are attending this call u it's a message to you are welcome to participate because u Maxim can maybe later a bit explain uh what we do on the crypto valley level to uh provide our feedback and uh I think uh what you concluded maximum it's u obviously we have to uh act now we have to provide more information and we need to tell regulator uh what exactly how it should be formalized in the future what is under SRO and I have a question to again um if I saw you publish article uh about

uh new requirements for the um affiliation with Sero for advisors and u maybe u I I think SRO model still will survive but it will completely changed who will be um regulated under um membership of ESRO. Uh do you think that they want just to keep uh the advisors and uh move everything to under FINMA and also if we remember I remember uh what we have only maximum five license uh on on fintech. Yes. And when it was announced like advanced regime license we are innovative country but then we have only five players and

we you know most of us probably was part of the uh licensing process of the license which never come true because FINMA just had no capacity or not interest to produce more license. And this also makes me give me feeling like yes we can all um be stuck in the queue to get a new confirmation that we will be managed by FINMA but it will it will never happen. So this is maybe for you to give your perspective as a lawyer what what we have to expect as the again my question is what who will be under ESO in one year time and if I have to

move to Finma do I have chance to be accepted? Yeah, it's a a very interesting question with within a very moving target framework obviously um if you assume the framework to be what the draft now published I mean it really says I mean Moximus is was completely right I mean at the moment it's written that almost everyone in crypto needs this new crypto institution license you have small exemptions. People only granting loans in crypto I guess are not covered by the new license or uh asset

management based only on uh crypto assets are still also not covered if I read the report correctly. But almost everything which is connected to exchange or transfer or custody would be now subject to this new license. So all these vas wasps would have to move from esro to finema and as you say I mean if you look at the fintech regime with four licenses out once have been five it's with Finma it's maybe not even the law which is so strict I mean the requirements are heavy but Finma's

mentality at the moment is to make it even more stricter and they have clear uh views on they have a look very much thoroughly on the viability of the business model of the financials the liquidity planning the capital. So in the end and you have to show that you surv survive that for three other years. So it's very comprehensive and you need many many efforts and costs to prepare this filing which takes also very long in which time you cannot really earn money you cannot be operational and uh yeah this obviously leads to a heavy consolidation.

So uh yeah in the end this is something we would have to avoid. I mean the estro landscape as you say they would lose all these crypto institutes on the other end they will gain all the legal advices such as our law firm. um a change there. But nevertheless, I guess for the industry, it would be good if we would be able to have something like uh like Maxim actually said with thresholds or a sandbox regime for the smaller and simpler operations which can also not work with these heavy costs and heavy requirements.

>> Um thank you Maxim. Maybe you share with us um how uh we actually proposing uh it's it's a draft I know but maybe uh just to give the participants of the call um understanding what can be the solution how it should be uh regulated in the future. >> Um it's actually not even a draft. It's a a a document that uh the Crypto Valley Association, the Blockchain Federation, and um a few other organizations um have been working on to really try to align what we would want to see. And so

that document is far from being final and also totally not uh yet written in stone. Um the document as a whole is currently roughly 51 page long and we need to uh narrow narrow it down and be more precise. But one element that I want to talk about today is is the um bilig cascad like a cascade a ladder of licenses that we are uh would like to propose because right now we are seeing that the new whole suggestion does lack a clear vision of what they actually want to achieve with all the great new

licenses and u lacking other uh elements. So um the idea of a ladder that we would like to see would um basically um I will show you a slide in in a second but the idea is that that we have a possibility to have services that uh each require their license or their approval from uh FINA. But on the top you would have the bank and the bank theoretically can do everything. Of course, even if you create a new bank, you have to ask FINMO for specific service lines that you would like to offer. But as a whole, the bank license

should give you full access to everything. One element that CIF right now is considering that the bank should not be able to uh issue a stable coin just like that um because they see it as a protection mechanism to have a separate legal entity with a separate um pool of funds that are backed and that cannot be touched. And they even have introduced a new wording for for that type of money. Um the kundelder and the those kind of of assets they cannot be pulled with with uh other assets from the bank. They cannot be used. They

cannot be uh lend out. They cannot pay interest neither positive nor negative. And if the bank or if the stable coin issuer is selling the stable coin, those funds are returned. And if proposed uh that this should be a separate legal entity. We are arguing that in theory it can still be within one legal structure called the bank. But those funds have to be segregated. they need to be kept as a separate um zander um and cannot be touched. Everything that I said before they they need to be protected but it can stay within the bank and even the

concerns of a bank run would not be uh harmed if the lines are protected properly and uh the bank could structure that. So having said that, if we then go back to the very bottom of our licensing or structure in in Switzerland, we would have the SRO members. Now let me quickly show you um a few well not even slides but uh images to give you a better idea. Can you see my screen? Is that is that readable?

>> Yes. Yes. So as of today we have the financial intermediaries in the self- reggulation down here and um this is fine. They can do many different things and if you go up the ladder you would have asset managers, trustees and a few more. We understand this is a very simplified uh structure. The today's situation is that we already have a new type of regulator up uh here the so-called offse organiz supervisory organizations they are similar to SRO's but the difference is that the asset manager is supervised by that

supervisory organization but the approval is given by FINMA. So there is already an element of FINMA included in here. And if we go even higher, we have the big funds and um payment systems and trading systems, the organized uh trading platforms. They are directly under FINMA. And somewhere here we have the fintech uh licensed entities. We have the securities dealer, big funds, fund managers and the banks. What we would like to propose is that we have something similar but we say we have the financial intermediaries under SRO and those are the simple businesses

that can convert one currency into another whether it's a cryptocurrency or not they can do payments but always on behalf of a client's order they are not uh pulling money. They're not keeping accounts for the clients. They are not um they cannot uh deal with securities and uh things like that. And if we go up the ladder, we would suggest that where we have the asset managers today that can uh buy and sell stocks on your behalf, give you advice into what you could put into your portfolio and actually manage the portfolio for you as a discretionary

basis. But the asset managers today, they cannot do that for crypto. But if we give them the possibility, okay, now you can do everything that you have been doing before as an asset manager plus crypto, that would be a cool thing. That would be more than what we have today. something that is not yet anywhere that clearly defined and would be a bit more organized and regulated than we are uh known from the SRO world under the supervisor organizations with an approval from FINMA. We know we know yes the asset managers have been struggling in the last few years and yes we lost hundreds of asset managers moving from SRO to that sort of

organization but again we are seeing that here we can actually fit in the crypto institute as something new that is more than what we have today but still less than what we have today under the thin uh tech license. And if we talk about the fintech license, we can consider that what is called fintech license today could be translated into the payment instrument institute, the talong middle institute up here, which is then uh this stable coin issuing or e-oney type of u institute that would be sitting directly under FINMA. It would

have the possibility to have accounts for the clients. It would have the possibility to to execute payments. It should also have the possibility to do everything that is down below that other uh companies is doing. Maybe a little bit less specific in in terms of fund management, but it would be a much higher um license, but it would be different from a securities dealer. right now. Um, CIF kind of was looking always at the securities dealer when talking about the crypto institute and the Talong middle institute and kind of make them all similar uh to each other only that the Talon Middle Institute

would be the issuer. In our s suggestion is we should keep them separated and parallel to each other but with clear differences. And then on top of that there would be the bank and the bank would have all the possibilities of everything that is below. Um here we have a little table that basically describes the differences of services within those organizations. So again if we start at the bottom we have the SRO's and they can do crypto custody but only if it's segregated. They cannot accept client funds. They can do they cannot issue stable coins. staking only if it's possible in the segregated uh wallet but

they are exchanging money from one currency to another as a OTC broker as a um well little conversion shop and uh theoretically they can also do that with security tokens and um um other um as financial instruments because theoretically they can do that today as well. It's not really much changing anything in this direction. Plus, they can do um payments. Um sorry, just to be clear what I just said, they can custody assets on your behalf, but they cannot trade assets for you. If you are an asset manager or a

crypto institute, you can execute orders in financial instruments, security tokens and similar and place them at a stock exchange at a uh through a securities broker dealer and uh so on but on behalf of your client. Um, other than that, the crypto institute is not much different from what we have uh down below. But if you give them the possibility to really uh play with with stocks, ETFs, index instruments, derivatives and so on on behalf of your client, that's that changes the the the

structure. That is a whole new element that is uh very beneficial. Then if we go up uh we have this uh payment um instrument institute and uh that can issue new versions of uh stable coins and it can hold the reserves of that stable coins and if you issue a stable coin that is denominated in in a fiat currency it's not really much different to what we know in European uh states that is the e- money license uh entities they have like the revolutes and and N26s of today's that can uh have accounts for everybody

plus everything else that we have discussed. A securities dealer today um is still uh or should be in the future still the same thing. They can do uh all of that but they cannot have an account for you where you can keep the money for a longer period. you can put in 100 Franks. They buy me one um a few Satoshi's worth of Bitcoin and uh send me back my or keep uh my wallet with the Satoshi's, but you're not supposed to have your money parked there for a longer period. Also they cannot issue uh pay stable coins but they can do trading in any kind of

uh stocks and security tokens and other tokens and they can also um issue derivatives and and other things like that. So so there there are definitely more than the um crypto institute just like that and then there is the bank on top. Now um I quickly stopped talking. Are there any questions here and please don't go into too much detail? If you really want to discuss that and provide your feedback into more detail, please um let's arrange a call and we can go into uh detail here. But if there are any clarifications right now, please let me know.

>> Thank you Maxim. I think we have uh one uh hand up and uh I suggest we go through uh also Martin presentation and then we um give the floor for questions and uh I suggest also Maxim yes it's a great stuff and I absolutely agree that this cascade can really solve the problem uh which we you know have now with black and white. So we need to have a different options for the market participants especially we already have the industry and what I also would like uh Martin to u describe uh in terms of the token itself the the new regulation.

So if we want to issue tokens if we want to issue stable coin uh how it will uh really support this or how it will prevent us from doing anything in the future. >> Yeah. So I I want to have here a little bit an upbeat note. I think it's very depressing. Sorry to say that what we heard so far. I think it's actually not a bad bad draft and I think we can actually do a lot of good out of this. You know, I think the key will be um in the crypto institute um to get uh SRO plus of some sort. you know that basically our members will be FINMA licensed which is an added value uh compared to the current SRO regime but

that basically um the industry is not being killed. So you get a little bit something in addition in terms of regulation that could be something similar like the external asset manager regulation like Maxim has alluded to. Yeah. Um but it could also be similar to the prop trading uh of the investment firms because when you look actually at the investment firms a prop trader is only uh basically liking needs a regulation if it's trading more than 5 billion notional insecurities. Yeah. So you could introduce kind of a threshold that below that you still are. Yeah. We have also to say that crypto is one of the few um assets where the spot is

really regulated like physical gold for example, physical real estate is not regulated AML but if you pack it into a financial instrument then it becomes regulated and crypto is the only real spot regulated asset and from that perspective you know also conceptually FINMA has to restrain itself But I'm very upbeat actually. I'm very positive. I think we will find a solution. Um that's part of this consultation process how we do laws in this country and that's how we also will have a good solution at the end. Yeah.

But now also addressing your question um about this new form of token um I have because it's a little bit a technical topic I have prepared a couple of slides here I hope you can see them. >> Can you see them? >> No. You need to double click to enter. Yes. Now we can see it. >> You can see >> or not anymore. No, not anymore. >> Okay.

So basically important is also to understand that actually what what kind of tokens are we talking here about and it's a very limited in scope actually you know so it's not every >> we see in the slides yeah >> okay it's not every digital asset you know so it's basically really payment tokens and because it's a little bit technical I would like to to pull up a few definitions so basically the crypto-based asset we already have now in regulation. Yeah. Where we need a fintech authorization. For example, if you have commingled cas really honestly. So if you look also at

all these papers which have been published in addition to the law, it's not really it's not so clear. But in the in the latest consultation, they actually make it very clear that they think it's only payment tokens. what kind of a crypto-based asset is. And so in the past and and now we have actually new definitions. So stable crypto-based means of payment. So this is a crypto-based asset. So it's it's a payment token which is issued in Switzerland and refers to the value of a currency issued by a government. So this is really only official currency. Yeah.

Issued by a government. So even if Bitcoin for example would be an official currency of a state that would not count here and whose value is has to be kept stable and where you can always redeem um the crypto-based asset. Yeah. So this is a is a new definition introduced and the payment institution will be able to issue this kind of crypto-based means of payment. I personally think this is a huge possibility, a huge opportunity for Switzerland to shape up as a stable coin issuance place. I mean all will depend on how much regulatory capital uh we will need for this. I mean this is not

yet clear. This will be defined in the ordinances of the federal council. But I think if we get here a light touch regulation, we could become a really international attractive stable coin issuance place. So that's a great opportunity I think which is in the making. And then the other one, a new kind of definition is basically the crypto-based asset with trading character. That's basically when you need this crypto uh institution license. And basically the definition as of now is it's a crypto-based asset which is not issued by a central bank or a state uh which is not a stable crypto-based means of

payment which is not a financial instrument and which is not a stable uh which is not a public deposit. So basically a bank deposit. So now and a utility coin is also excluded. Um so basically it's a negative definition. I think this is a little bit too uh too cumbersome. It should be a positive definition. But what they mean according to the consultation paper is really just payment token. So it's Bitcoin, it's Ethereum, it's any kind of payment token. It's not asset back token. It's not utility coins, you know. So that that's always what we have to keep in

mind when we talk about these definitions. Yeah. Um I think here we need we still need refinement um to make it really sure what they mean. So for example tokenized assets or tokenized physical uh commodities for example gold of some sort would not be part of this definition. But that should be made absolutely clear to really be sure that this is only it only means real payment tokens.

Now when we look at the payment institution uh that's also very interesting. This is the current fintech authorization. So there will be a grandfathering of the existing licenses. Typically there will be a period of one to two years until you have to comply with the new rules and regulations. Uh what they can do basically is what the old fintech in fintech and could do. Yeah. Basically you could accept client assets. This is a new definition and I think this is a very good definition because it's different than public assets. Public assets always needs a lot of regulatory capital. That's like a bank. But here client asset will be

segregated. So it's bankruptcy remote. So if the company would go bankrupt, the client would actually have a segregated asset. So that's why you will need much much less capital and you don't have this discussion always about public deposits. Now what they can do actually is is payments and this probably also encompasses payments in stable coins not just fiat. We can issue stable crypto-based means of payment.

We can hold these assets in custody. But what is not really yet part of it, but we probably would need to have that is that we could also keep custody of crypto-based assets for trading purposes. Sure, you could say okay you have in in addition to get a payment institution license but at the moment how the draft is being drafted there is two there's a real issue here because a payment institution only has client assets means it's a segregated asset doesn't need regulatory cap capital is not a public deposit however if you look at the crypto institution license that's actually public deposits there they speak about that assets which are

deposited with the crypto institution is is a public deposit which would mean a lot of regulatory capital. So in other words, it's going to be very hard actually to combine both licenses in one entity because for the payment part you have only client asset and for the crypto institution part you have the public assets public deposits. So this needs alignment. In my view also the crypto institution should have client assets meaning the assets are fully segregated. They're bankruptcy remote.

Yeah, that would also be a huge alleviation for the industry because everybody who has to deal with public deposits knows what that means. It's a lot of headache. It's regulatory capital governance around it. And then also obviously it should be possible for a payment institution with the same license to to trade in crypto-based assets for trading purposes and in particular to do at least exchange you know fiat crypto crypto crypto. I think this has to be made absolutely clear and it should be part of the same license.

Now when we look at the crypto institution definition as of so they we have already heard couple of times basically took the investment firm as a as a precedence but as you have already alluded to it's it's actually not really the right precedence in particular in terms of proprietary trading because proprietary trading in Switzerland in financial instruments is very lightly regulated And as I've said at the beginning, I think it should be sim should be identical for crypto-based assets.

Either you do more than 5 billion, maybe you can have a lower threshold or you're member of a trading place or you're basically uh um a prop trader, a market maker, you know, but anything below should be either SRO or AO or something like that. Yeah. So to sum it up, I think it's a good first proposal, but it needs refinement. But I'm very convinced and optimistic that we will get there and we will have here a very good framework which actually will support and enhance the industry going forward. So I don't see here that you have to leave Switzerland. I I think actually quite the opposite. You have to

come here. It's a great place. We will have one of the best frameworks in the world. there will be light regulation but uh it's going to be also in the future great place to do business. >> Um thank you Martin it's great we have optimistic um presentation and uh we all do hope that um this consultations will turn into the uh something which is good for regulator but even better for the market participants. Yes. And uh as crypto valley we're working hard on uh achieving this and um it's by the way on volunteer basis everyone who involved in

groups working groups and board members we are all um delegating our time which we can sometimes spend on our families. I know that for example has a day off today right? Yes. So and it's really great you you coni I convinced you to participate. So yes, this is and this call is basically to give you a bit of overview and feeling what's going on and of course uh we can criticize things so we can try to collaborate and uh do something together to convince and to present for regulator and Maxim maybe couple words from you about next steps if anyone from the call

would like to participate what he or she need to Yes, thank you. I just wanted to raise and ask for for that. Um, right now as I mentioned there is a consolidated uh document that different organizations are working on and right now it is already almost finished. It's um expected to be ready for um sharing with everybody by next week or end of next week. That document is basically the proposal of a direction. And it's very important that uh when we provide

feedback to to civ we don't have like one person saying they want A second person says they want B and third person say it should be C then we will not reach anything and right now this document is basically already a consolidated version that we all want B to happen and um and that is basically lining about the positions that the organizations have agreed on. Now, um with that document, we will distribute that. The crypto valley association will start writing their own answer to CIF based on that document. The blockchain federation

will do the same. The Bitcoin association and all other organizations will do the same. But you are all welcome to write your own feedback to the regulator and hopefully align uh with with what we are uh proposing. But you are free to say that in your words or you just copy our documents signed below and say yes we want that too. Uh this is possible and even more that document right now is 50 pages long but it's still a highlevel overview. That topic is huge. that topic is complex and there is definitely room for clarification in certain details. So if you have enough time until end of January to really dig deeper in a a

specific area of of the consultation and talk about the definitions of the stable coin or the uh kundang gatherer or other things and you really wanted to do it more academic and really um work on that. This is very very uh helpful and much appreciated not only by us but also by CIF. They would they would need that because this is what they have been lacking. So um feel free to reach out to us. Um you will get your copy of the shared document. We will share that with all working groups and all CVA members for sure. But if you really want to be more active and and really contribute more,

please let us know. Then if you work on a paper, share that with us. We will then um consolidate that and again also push that to into CIF um but also keep a track of of uh people working on a on a similar topic together. So yeah, your help is greatly appreciated. So please don't feel useless. We need you. We need your name on the document. This is Switzerland. This is democracy. We need people to go to the regulator and tell them.

>> Yes. So great Maxim, thank you so much. I think we have six minutes left and I see some people wrote a questions but I would propose that you guys raise your hand now and uh we can answer it that everyone hear it. So if you have questions you are welcome. There there is a question from 41787 in the chat and a quick answer here. There is a separate conversation going on what digital assets can be used for from a perspective of a bank. Using a stable coin as a collateral for interbank just like that uh may be questionable

because there is still the same amount of bit of stable coins sitting in a in a bank. So you can use that as a collateral but there there is more to that and there is a possibility to have other digital assets backed by not fiat currency but a commodity or anything else and can you use that for collateral? that is subject to discussion. The definitions right now are not quite clear here. >> And we we have one more question from and uh this participant has said he already got my answer and we have one more an anonymous attendee with a long text here. Um so would you like to raise your hand and to ask this question

publicly that everyone can hear this question? because uh it's quite a long question. Okay. Uh Sarah, please go ahead. >> Hi everyone. Thank you so much. My my question is more around how close or how are the regulators currently feeling about ering away from international norms from having a cursory look over the proposal. It appears that the agenda was to align with more international

um international aspects or international norms when it comes to regulating crypto. uh everything from the Genius Act to to NE the European Union. >> However, with what I can see from the regulation of the proposal so far, it appears that Switzerland wants to even set set up things like a secondary market, segregation of of um of of customer assets, etc. I mean, how how what's what's your feel the feeling so far with the additional conversations you've had? Does it look like this is going to be possible or is this just a wishful thinking or >> it's difficult to say right now and u

what we know and it was kind of mentioned by CIF that they are not looking into uh Europe and Mika they kind of see that Mika messed up um in in many areas so they're not trying to copy Mika but they're looking very closely to the US and the Genius Act and what is going on over there and they're kind of orienting in this direction >> but again that um is not uh final and uh may take some time plus there may be some other uh elements and that is part of the the feedback that we are also providing to them. If we copy one to one what is happening in the US we are

losing. If we are copying one to one what is happening in the EU, we are definitely losing. So we need to have our own thing here that is different and then we have a competitive advantage otherwise people will go elsewhere and we we we are losing out it we need to have something special. >> Yes, Maxim definitely see that and I can understand why. The only thing is that these two uh markets are huge and I think you mentioned it from the start that they're actually well established. They they've drawn up the groundwork. So in terms of being competitive, would it be sufficient merely to create a a cascade or a cascade of different licensing um possibilities where there

are markets that are operating differently and how how do they interchange? So if someone is trying to do trades on involving both Switzerland and let's say the US, are they going to have to now have to account for even more by way of compliance cost or or regulatory um uh compliance costs just to make sure that they can do that uh between both or are they just going to choose Switzerland with with within its market? I think this is a great question but I think the answer here is way too complex to answer it just like that. The you know the financial system is complex

international crossber systems are even more complex. Bringing uh crypto regulation into that element is >> I mean >> is a problem. May may I suggest uh because we are running out of time. We have to stop in one minute and I just suggest that Syria we can continue our dialogue in the next B weekly meetings and people you are welcome uh to join us in in capacity of members. You can be part of our IMO working group or any other groups. And I would like to thank you once again Martin and Maxim and our CVA supporting uh marketing uh marketing department for

organizing this meeting and um yeah I hope you had a bit of um fresh ideas of what's going on and uh please uh contact us if you have questions or would like to participate. So have a good weekend. Thanks everybody. >> Bye >> bye. >> Bye-bye. >> Bye-bye.