Threshold for KYC less - inner

Swiss Regulator Further Reduces Threshold for Buying Bitcoin KYC-less

20 Aug, 2021

Bitcoin Brokers in Switzerland can sell Bitcoin and send them directly to their customers' non-custodial wallets without having to do extensive Know Your Customer (KYC) on their customers. Until the beginning of this year, the customer didn't need to create an account or upload any documents if the total amount was below CHF 5'000 (~ USD 5'470) per transaction (or several transactions that appear to be linked to each other) and CHF 100'000 (~ USD 109'400) per year. If the customer is buying Bitcoin through a bank transfer, the name and address of the buyer are still visible to the broker, and the sending bank has done full KYC on its client. This is commonly referred to as KYC-less.

Swiss virtual asset service providers (or VASPs - a term used by regulators to refer to brokers, exchanges, banks and other financial intermediaries dealing with cryptocurrencies) such as Bity, Relai, bittr, and Pocket, but also Bitcoin ATM operators, work within this regulation to provide their customers with a convenient, privacy-friendly way to buy and sell Bitcoin.

In 2020, the Swiss Financial Market Supervisory Authority (FINMA) introduced GvW-FINMA article 51a. Article 51a reduced the previous limit of CHF 5'000 to CHF 1'000 per transaction (or several transactions that appear to be linked to each other). The Bitcoin Association Switzerland criticized the new regulation for creating a legal difference between cryptocurrencies and traditional currencies, as with the latter, the limit stays at CHF 5'000.

At the beginning of this week, Swiss VASPs received letters from their Self-Regulatory Organizations (SRO) clarifying what 'several transactions that appear to be linked to each other' means:

Zwischenzeitlich hat die Eidg. Finanzmarktaufsicht FINMA gegenüber den SRO eine allgemeinverbindliche Definition von „miteinander verbundenen Transaktionen“ bei Wechselgeschäften im VASP-Bereich vorgegeben. Demgemäss qualifizieren Transaktionen nun als „miteinander verbunden“, wenn diese innerhalb von 30 Tagen von der gleichen Person vorgenommen werden.

In practice, this means: The limit will be reduced to CHF 1'000 per 30 days. The VASPs have a transition period until the 31st of October 2021 to implement the new limit.

While Switzerland is still one of the few countries with regulatory clarity when it comes to Bitcoin, this reduced limit will impact its attractiveness as a jurisdiction for VASPs. Most likely, the regulator can assume some pushback from the industry.

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