On the 23rd and 24th November 2018, the Blockchain Leadership Summit was held in Basel, Switzerland. The participating leaders represented states (for example, Maltese Prime Minister Joseph Muscat), blockchain businesses, the finance sector, academia as well as various industries.

Manuel Meyer and Yves Mauchle of Baker McKenzie Zurich held a workshop on structuring an initial coin offering. The first topic of the workshop was the regulatory categorization of the token based on its underlying economic function. There are, of course, different types of tokens.  They can be a means of payment (payment token), provide access to a digital application or service (utility token), represent assets such as ownership in physical assets, shares in companies or claims (asset token), or combine several features of these token types (hybrid token). The type of token will trigger different legal consequences, under Swiss and foreign laws. For an asset token, for example, it is necessary to comply with the relevant securities laws. With respect to payment tokens, anti-money laundering requirements need to be considered. Utility tokens can trigger consequences such as the levying of a value added tax.

There was also a discussion of the advantages and disadvantages of different legal structures. The structures of a Swiss limited liability company or a corporation are generally perceived as suitable for most business models due to flexible structuring and financing options. Additionally, in Switzerland, there are relatively low profit and capital taxes. Simple procedures apply to the acceptance of new partners or shareholders, capital transfer of ownership, as well as dissolution of the company.

A Swiss Foundation may be a convenient vehicle under certain circumstances, such as in a predominantly altruistic setting. This can entail certain tax advantages. However, there are significant drawbacks. Most importantly, a Foundation’s purpose cannot be changed for at least ten years, the founder can exercise almost no control, and a change of domicile requires a long and costly procedure (if it can be done at all). Also, a Foundation is subjected to the governmental supervisory authority, which can intervene, for example, in the event of endangerment of the Foundation’s objective.

Summit participants confirmed our observation that the market is moving in the direction of security tokens. However, due to the regulatory complexity of public offerings (security token offerings (STO) typically fall under the securities law and therefore involve a duty to prepare and publish a prospectus) and the challenging state of the market, investors tend to sell such tokens in private placements rather than public offerings. In the European Union, for example, the publication of a securities prospectus must comply with the strict conditions of the Prospectus Directive, including an approval of the competent Member State authority. This can only be avoided if a private placement exception is applicable, for instance if an offer of securities is addressed to fewer than 150 natural or legal persons per Member State or in the event of an STO with a total investment of at least 100,000 euros per investors. Further exceptions from the Prospectus Directive include denominations of at least 100,000 euros and small total offering sizes (less than 8 million euros within twelve months).


Yves Mauchle is an associate in the Corporate Finance practice area in Zurich. He focuses on debt and equity capital markets as well as financial services regulation. Yves regularly represents financial intermediaries and other clients on regulatory matters and advises on the particular challenges posed by fintech business models, including ICOs.