Crypto Adoption Around the World: Switzerland

The Current State of Crypto Adoption in Switzerland 

Source: Freepik

Switzerland remains a leader in cryptocurrency adoption and regulation in 2024. The country boasts a 23% crypto adoption rate, the highest in Europe, thanks to its progressive legal and economic environment

Switzerland’s proactive approach to crypto adoption dates back to 2014 when Zurich set up its first Bitcoin ATMs. By 2016, the town of Zug accepted Bitcoin for council services, and Swiss Federal Railways enabled Bitcoin purchases at over 1,000 ticket machines nationwide.

Similarly, Zug allows residents to pay taxes in Bitcoin and Ether, up to 100,000 Swiss francs in equivalent crypto. The city of Lugano also established Bitcoin, Tether (USDT), and its own LVGA Points token as legal tender.  

“Lugano is investing in its future. In recent years, we have already implemented blockchain-based solutions including the MyLugano app and its LVGA Points payment token, the Lugano digital franc, and the 3Achain blockchain infrastructure.”

Michele Foletti, Lugano’s Mayor.

Switzerland leads Europe in crypto adoption, hitting a 23% digital currency adoption rate in 2024, above the European average. 

Source: Bitpanda/YouGov 2024

With 18% adoption in Austria and 14% in France, Switzerland stays well ahead, and countries like Germany and Italy are further behind at 11% and 9% respectively.

The Henley Crypto Adoption Index 2024 also ranks Switzerland as 11th based on their adoption and integration of cryptocurrencies and blockchain. 

Switzerland has positioned itself as a cryptocurrency-friendly country, drawing major companies, including Solana and Cardano, to Zug. This area, known as Crypto Valley, offers resources like capital, talent, and a thriving ecosystem. Crypto Valley remains a key global center for blockchain and cryptocurrency innovation.

Traditional Swiss banks, such as Bordier & Cie, accept cryptocurrency and allow individuals and businesses to convert it into fiat currencies like the Swiss franc or stablecoins like USDT.

Switzerland’s consistent and supportive crypto regulations, backed by a straightforward tax policy and early public adoption initiatives, position it as one of the most crypto-friendly nations globally.

Crypto Larws in Switzerland 

Source: Freepik

Since 2017, Switzerland’s federal government has legally recognized virtual currencies not as official currencies but as digital securities that can be traded, bringing them under asset classification. 

In the same year, the Swiss Financial Market Supervisory Authority (FINMA) issued the country’s first crypto asset management license and began regulatory steps for blockchain-based assets. This includes payment tokens (cryptocurrencies), utility tokens (access tokens for digital applications), and asset tokens (representing physical assets or dividends).

In 2021, Switzerland introduced a blockchain law, the Federal Law for Developments in Distributed Ledger  Technology (DLT), which formalized the tokenization of assets and regulated blockchain-based securities. This law provided clarity on asset custody, requiring that assets remain accessible to customers even in the case of custodian bankruptcy.

The DLT Act

The Swiss legal landscape for digital assets advanced with the introduction of the DLT Act in 2020. This act amended existing regulations to support the issuance of asset tokens and improve client protection using wallet providers and trading platforms. The DLT Act also introduced new features, such as:

DLT Rights

The Act allows the representation of securities on blockchain systems. A new legal category, ledger-based securities (Registerwertrecht), is established under the Code of Obligations. These securities are exclusively transferable through digital registers that meet specific integrity and transparency standards.

These rights can be issued and transferred on blockchain platforms. This enhances transparency and efficiency for digital securities trading. It eliminates the need for traditional written contracts for asset transfers, aligning with blockchain’s automated processes.

DLT Trading Systems

The Financial Market Infrastructure Act now includes DLT trading systems. These systems facilitate the trading, custody, and settlement of DLT securities. 

This act establishes licensing for DLT-based trading platforms, enabling secure trading of blockchain assets. Smaller platforms posing minimal systemic risk are eligible for simplified licensing requirements.

These systems are recognized as financial intermediaries and are subject to anti-money laundering (AML) regulations. This ensures compliance with Know Your Customer (KYC) standards to prevent fraud and illicit activities.

Crypto-Asset Segregation in Bankruptcy

The law safeguards digital assets held by custodians during bankruptcy proceedings. Crypto assets can be segregated in bankruptcy if custodians maintain exclusive control over them.

This ensures that crypto assets are treated separately from the custodian’s assets, protecting investors from potential losses. This prioritizes client ownership and reduces counterparty risk in cases of insolvency.

Legal provisions clarify asset segregation for beneficiaries, including scenarios like data stored with cloud providers.

DLT Amendments to Other Laws

The DLT Act introduces amendments to several Swiss laws to create a comprehensive regulatory framework for distributed ledger technologies (DLTs), facilitating their integration into Switzerland’s financial and legal systems.

• The Banking Act has been amended to expand the Fintech license, now covering DLT-related activities. 
• The Financial Services Act (FinSA) has been updated to redefine “securities” to include ledger-based securities.
• Under the National Bank Act, the Swiss National Bank is tasked with overseeing systemically important DLT trading systems.
• The Anti-Money Laundering Act has been revised to include DLT trading systems within the definition of “financial intermediaries.” 

Anti-Money Laundering Act

Switzerland’s Anti-Money Laundering Act (AMLA) outlines requirements for financial intermediaries, particularly in customer identity verification and identifying the beneficial owners of funds. When it comes to cryptocurrency, AML regulations have specific applications:

Primary Market and ICOs 

The Swiss Financial Market Supervisory Authority (FINMA) views the issuance of cryptocurrencies, such as payment tokens or stablecoins, as financial intermediation. This activity, like an ICO, falls under the AMLA since it involves issuing a payment method.

Secondary Market and Trading

Selling cryptocurrencies directly to another party or using them to buy goods and services doesn’t count as financial intermediation under AMLA. However, the revised Swiss Anti-Money

Laundering Ordinance, updated alongside the DLT-Law, specifies that facilitating cryptocurrency transfers in an ongoing business relationship (dauernde Geschäftsbeziehung) is considered a service subject to AMLA. 

This clarifies that only services tied to continuous business transactions in cryptocurrency are covered under Swiss AML obligations.

Mining

Switzerland does not have specific laws or regulations aimed directly at cryptocurrency mining. As a result, mining activities are generally permitted without any particular legal restrictions.

Since mining cryptocurrencies for personal use is not classified as financial intermediation, it does not fall under Swiss money transmission or anti-money laundering regulations. 

Additionally, mining is not typically considered a financial service under the Financial Services Act (FinSA). This means that individuals or entities engaged in cryptocurrency mining for personal use are not subject to the same regulatory oversight as financial intermediaries or services.

Taxation of Crypto in Switzerland 

Source: Freepik

Switzerland treats cryptocurrencies as an asset class instead of a security. The country handles their ownership and transfer similarly to assets like property or gold.

The Swiss Federal Tax Administration (FTA) provides clear guidelines on sales and transfers of cryptocurrency.

Switzerland’s tax treatment of cryptocurrency is divided into several categories:

Wealth Tax

Cantonal authorities in Switzerland impose wealth tax on total assets, including cryptocurrency holdings, which are valued similarly to foreign currency holdings. The Federal Tax Administration sets an annual rate for each cryptocurrency based on market averages, which cantons typically adopt. 

Cantonal tax authorities consider cryptocurrencies comparable to bank deposits and subject them to wealth taxes. When no FTA rate exists, cryptocurrencies must be declared based on the trading platform’s year-end price or, if unavailable, at their original purchase cost. Tax declaration rules may vary by canton, so individuals need to check requirements specific to their location.

Income Tax

Cryptocurrency received as part of a salary is considered taxable earned income. Employers must record the Swiss Franc value of the cryptocurrency at the time it’s paid. Self-employed individuals who receive crypto for goods or services must declare its Swiss Franc value as income. 

Additionally, income from crypto mining is taxable, with its classification depending on whether the miner is an employee or an independent contractor.

Professional Cryptocurrency Trading

Profits from professional trading activities are taxable, while losses are tax-deductible. Cryptocurrencies treated as business assets must be listed on the balance sheet at book value, with price fluctuations recorded according to standard accounting rules.

Capital Gains Tax

Capital gains on movable private assets, including cryptocurrency, are typically not subject to capital gains tax, and capital losses are not deductible.

Tax on Cryptocurrencies Held by Legal Entities

• Capital Tax: Legal entities are subject to annual capital tax, requiring them to report cryptocurrencies either at cost or, if higher, at the FTA’s year-end rate. If the FTA provides no rate, the acquisition cost is used.
• Corporate Income Tax: Corporations pay income tax on profits from cryptocurrency sales. Unrealized gains are taxed if the corporate investor uses mark-to-market accounting, per Swiss accounting standards.

Value-Added Tax (VAT)

For VAT purposes, Switzerland treats cryptocurrencies as equivalent to legal currency. This means that crypto trading, exchange activities, and related services are not subject to VAT.

Crypto Regulations in Switzerland 

Source: Freepik

Switzerland has led secure and transparent cryptocurrency regulation, treating virtual currencies as digital assets that can be traded online.

Switzerland’s reputation for progressive crypto regulation aligns with its decentralized government structure. This approach has led to Switzerland’s notable milestones in crypto regulation, especially in the region known as Crypto Valley, which emerged in Zug in 2014.

Crypto Regulators in Switzerland 

In Switzerland, several authorities oversee the regulation of the cryptocurrency market.

The Swiss Parliament, as the legislative body, plays a key role in creating laws related to cryptocurrencies. The Swiss Financial Market Supervisory Authority (FINMA) is the primary regulator, responsible for overseeing and regulating financial institutions and services, including those that deal with cryptocurrencies and blockchain technology. 

FINMA ensures that financial players in the crypto space adhere to Swiss laws, especially those related to anti-money laundering (AML) and financial market stability.

The Swiss National Bank (SNB), as the central bank of Switzerland, is responsible for the country’s overall financial stability. While the SNB does not have direct regulatory authority over cryptocurrencies, it closely monitors developments in the crypto market and has issued several warnings about the risks. 

Recently, Chairman Martin Schlegel emphasized that physical cash will continue to play a significant role in Switzerland’s payment system.

Additionally, the SNB is involved in projects related to central bank digital currencies (CBDC), exploring blockchain-based solutions for future monetary systems.

Trading Venues Regulation

The regulation of trading venues for digital assets in Switzerland has undergone significant changes, particularly with the introduction of the DLT Act in August 2021. This act allows for a new category of licensing called “DLT Trading Facilities,” which applies to multilateral trading venues for tokens represented on a blockchain. 

These venues must follow non-discretionary rules for trading and post-trading activities and can allow unregulated participants or centralized token deposits.

Currently, no Swiss trading venue has been licensed as a DLT Trading Facility, though securities firms have been granted licenses to operate Organised Trading Facilities (OTFs) that can trade DLT Rights.

Wallet Service Providers

In addition to trading venues, the regulation of wallet service providers has also evolved. A wallet provider that has control over private keys is considered a financial intermediary and must comply with anti-money laundering (AML) rules. 

However, the DLT Act allows digital assets held in custodian wallets to be segregated in the event of the provider’s insolvency, which means clients’ assets are protected.

For fintech companies offering custodian wallets with pooled client assets, a fintech license is required. The DLT Act allows these companies to offer services like accepting deposits of up to CHF100 million, but the client assets must be segregated.

Staking services

Staking services, where clients lock their crypto assets to support blockchain networks, are regulated as well. While staking itself isn’t regulated, offering staking services requires careful management of clients’ assets. Non-licensed custodians can only offer direct staking, where assets are held separately for each client.

Licensed custodians must meet specific rules to avoid triggering capital requirements, including maintaining transparency with clients about risks and ensuring proper risk management measures are in place.

Crypto Asset brokers

Crypto-asset brokers are also regulated under Swiss law. If tokens qualify as securities, brokers must be licensed under the Financial Institutions Act (FinIA). They must adhere to AML rules, and if they accept fiat currencies or tokens on their accounts, they may need a banking license. However, they can avoid this if they rely on a settlement account exemption, which limits the holding of client funds to a short period.

Crypto Usage in Switzerland 

Source: Freepik

Cryptocurrency is widely used in Switzerland, particularly in the following ways:

Payments

Many businesses in Switzerland accept digital currencies like Bitcoin and Ethereum for goods and services. Some high-profile retailers, restaurants, and even real estate agencies accept cryptocurrencies as payment. This is facilitated by payment processors like Bitcoin Suisse, which help businesses integrate crypto payments. 

For example, the online retailer Digitec Galaxus launched its first attempts to use cryptocurrencies as a payment method in March 2019 in collaboration with Datatrans AG and Coinify.  Customers were able to use cryptocurrencies such as Bitcoin and Ether as a means of payment for their purchases.

Investment and Trading

Switzerland is home to several crypto exchanges, such as Swissquote and SIX Swiss Exchange, where individuals and institutions can buy, sell, and trade cryptocurrencies. The country has also fostered several crypto hedge funds and investment vehicles. Swiss banks, including major ones like UBS and Credit Suisse, have also begun offering services related to cryptocurrency trading and custody for institutional investors.

ICO and STO Market

Switzerland has hosted numerous Initial Coin Offerings (ICOs) and Security Token Offerings (STOs), especially in the early days of the cryptocurrency boom. The country has clear regulations around ICOs, which have allowed companies to raise capital through the issuance of tokens.

Tax payments 

Switzerland has integrated cryptocurrency into its tax payment systems, with Zug and Zermatt leading the way. Zug allows residents and businesses to pay taxes up to CHF 100,000 using Bitcoin or Ethereum through Bitcoin Suisse, which converts crypto into Swiss francs to mitigate volatility risks. Other regions in Switzerland are exploring similar measures to enhance crypto adoption.

Wealth Management

Swiss private banks and wealth management firms offer services tailored to high-net-worth individuals looking to invest in cryptocurrency. They integrate cryptocurrency into wealth management by offering services such as secure custody, trading, and portfolio management through private banks and asset managers.

Institutions like Julius Baer provide tailored digital asset solutions, while Falcon Private Bank enables direct crypto trading and storage. SEBA Bank bridges traditional banking and digital assets with offerings like crypto loans and diversification strategies. 

Factors Driving Crypto Adoption in Switzerland 

Source: Freepik

Several factors are driving the adoption of cryptocurrency in Switzerland:

Supportive Regulatory Environment

Switzerland has a clear and favorable legal framework for cryptocurrencies, established by the Swiss Financial Market Supervisory Authority (FINMA). This includes regulations for crypto-asset classification, Initial Coin Offerings (ICOs), and Security Token Offerings (STOs), providing businesses and investors with legal certainty.

Crypto-Friendly Taxation

Switzerland’s tax laws are relatively favorable for crypto users. Cryptocurrency is considered property and is not taxed as income unless used for business activities. Additionally, capital gains on cryptocurrency holdings are generally not taxed for individuals, making it an attractive location for crypto investors.

“Crypto Valley” in Zug

Zug, known as “Crypto Valley,” has become a global hub for blockchain and crypto businesses. The city’s favorable regulatory environment, low taxes, and support from local authorities have attracted numerous blockchain startups, creating a vibrant ecosystem for crypto innovation.

Institutional Support and Banking Services

Swiss banks, including major ones like UBS and Credit Suisse, have started offering crypto-related services. This includes custody and trading services for institutional investors, providing legitimacy and stability to the market. The integration of cryptocurrencies into traditional financial systems is a significant driver of adoption.

Public Awareness and Education

Swiss universities and educational institutions are actively engaged in blockchain and crypto research. There are also a number of local meetups, conferences, and educational events that help raise awareness and increase adoption among the public.

Access to Crypto Trading and Investment

Switzerland has multiple cryptocurrency exchanges and platforms, such as Swissquote and the SIX Swiss Exchange, which allow individuals and institutions to easily buy, sell, and trade cryptocurrencies. This accessibility contributes to wider adoption.

Challenges of Crypto Adoption in Switzerland 

Source: Freepik

Despite its strong position in cryptocurrency adoption, Switzerland faces several challenges:

Regulatory Uncertainty

While Switzerland has a clear regulatory framework, the cryptocurrency landscape is still evolving. There is potential for future regulatory changes that could impact the market, especially with global trends influencing Swiss regulations. Clarity on how certain crypto activities will be taxed or treated under new laws can be a concern for businesses and investors.

Volatility and Speculation

Cryptocurrencies are known for their price volatility. This presents a barrier to adoption, particularly for those looking for stable investments or secure stores of value. The speculative nature of the market can deter long-term investors or everyday users who are risk-averse.

Security and Fraud Risks

As with any digital asset, cryptocurrencies are susceptible to hacking, fraud, and other security threats. Even in Switzerland, where the infrastructure is advanced, there have been instances of exchanges or wallet providers being targeted by cybercriminals, raising concerns over security and trust.

Anti-Money Laundering (AML) Concerns

Switzerland adheres to strict anti-money laundering (AML) and know-your-customer (KYC) regulations. These requirements, while crucial for reducing criminal activities, can be burdensome for crypto businesses and individuals, potentially deterring new users or businesses from entering the space.

Potential Benefits of Crypto Adoption in Switzerland 

Source: Freepik

Financial Innovation

Switzerland’s position as a global financial hub can be reinforced by its adoption of cryptocurrencies and blockchain technology. Initiatives such as the “Crypto Valley” in Zug serve as innovation centers, attracting top blockchain projects like Ethereum and Cardano. These projects not only bring new developments but also create opportunities for partnerships, research, and job creation. The widespread experimentation with blockchain technology ensures that Switzerland stays ahead in the global race for financial innovation.

Foreign Investments

Switzerland’s crypto-friendly regulations, combined with its stable political and economic environment, make it a preferred destination for foreign investors and blockchain companies. Major players like Binance and Coinbase have established their presence in the country due to clear regulatory guidance and a supportive ecosystem. This inflow of foreign capital helps in creating jobs, advancing blockchain research, and strengthening Switzerland’s position as a leader in the crypto space. Additionally, this trend provides opportunities for collaboration between local and international businesses.

Enhanced Payment Systems

Cryptocurrencies offer an alternative to traditional banking for cross-border transactions, with lower fees and faster processing times. Swiss companies like Bitcoin Suisse provide infrastructure for individuals and businesses to make payments in cryptocurrencies such as Bitcoin and Ethereum. This simplifies international trade and reduces the dependency on conventional financial intermediaries. Additionally, several Swiss merchants and service providers now accept cryptocurrencies, signaling growing mainstream adoption.

Diversification of Financial Assets

Cryptocurrencies provide Swiss investors with access to innovative financial instruments, complementing traditional assets like stocks, bonds, and commodities. Tokenized assets, such as real estate or fine art, are becoming popular investment options. For example, platforms like Sygnum Bank enable Swiss investors to own fractional shares of high-value assets, increasing accessibility and reducing entry barriers for wealth creation. This diversification ensures that Swiss investors can hedge against risks in traditional markets while exploring the growing digital asset economy.

Reducing Dependency on Traditional Banks

Cryptocurrencies allow individuals and businesses to have direct control over their finances, bypassing traditional banking systems. This decentralization is particularly significant for sectors or regions that face challenges with banking access. Even in a highly developed country like Switzerland, reducing dependency on centralized banks ensures resilience against systemic risks and empowers users to make financial decisions independently.

Conclusion 

Switzerland’s proactive legal, economic, and regulatory measures position it as a global leader in crypto adoption.

From early adoption initiatives like Bitcoin ATMs in Zurich to the integration of crypto in tax payments in Zug and Lugano, Switzerland has consistently shown its commitment to embracing digital currency. The introduction of the DLT Act and the recognition of ledger-based securities also highlight the country’s efforts to adapt its legal system to emerging technologies.

As cryptocurrencies continue to evolve, Switzerland’s proactive stance offers a roadmap for other nations looking to balance regulatory oversight with technological progress. It remains a model of how nations can adapt to the digital economy while safeguarding financial stability and encouraging economic growth.