Founder naivety or regulatory overreach?
Amid frequent media criticism of Switzerland’s supposedly heavy-handed financial oversight, many founders and investors claim that the real problem is overregulation. They argue that FINMA has applied bank-level standards to fintech start-ups, demanding governance, capital and risk management structures far beyond what small teams can handle. In their view, the regulator “doesn’t get fintech”, enforcing prudence designed for traditional banks but ill-fitted to digital-first innovators. The result, they say, is a licensing process that takes too long and costs too much relative to the business opportunities it unlocks.
FINMA sees it differently. The regulator and seasoned industry insiders insist that the core issue is not excessive caution but applicants’ lack of regulated-market expertise. Many start-ups are founded and led by engineers and developers who underestimate compliance, risk governance and supervisory expectations. The regulator’s role, they argue, is to protect depositors and the financial system – not to take chances on underprepared ventures. From FINMA’s perspective, the licensing process is not a bureaucratic hurdle but a necessary proving ground: it filters out unsound business models and signals to the market which fintechs are credible, sustainable players in the financial sector.
The policy response
This stalemate may finally shift. A new set of license categories is now on the table in the draft bill to amend the Financial Institutions Act. Switzerland’s fintech regulation may be moving toward a more flexible, forward-looking framework. The evolution from FINMA’s “banking license light” to the Federal Council’s new dual-license proposal reflects a growing recognition that innovation and consumer protection must advance together – not in opposition.
A modest track record: FINMA’s “banking license light”
Introduced by FINMA back in 2019 under the revised Banking Act, the current fintech license (or “banking license light”) has allowed firms to hold deposits of up to CHF 100 million. However, it was tied to two strict caveats that placed a rigid corset on potential fintech business models:
- No lending or investing of deposits
- No payment of interest on client funds
While the fintech license was intended to lower barriers for start-ups and encourage innovation, the aforementioned constraints have made the license unattractive for most modern fintech models, especially those built around payment services, crypto wallets or neobanking. Indeed, many have primarily viewed the license as a mere stepping stone to a full banking license rather than a viable framework in its own right.
A turning point: Federal Council moves ahead on stablecoins and crypto
Recognizing the disconnect between current regulations and fintech business reality and to reflect emerging international standards for supervision on stablecoins and services with cryptocurrencies, the Swiss Federal Council has now launched a consultation process for an amendment to the Financial Institutions Act. The proposed bill marks the end of the fintech license, replacing it with two new license categories instead: one for payment institutions and another for crypto-institutions.
The proposed amendment allows payment institutions to issue a special type of stablecoin subject to certain obligations and requirements aimed at strengthening consumer protection and anti-money laundering rules. In addition, it will remove the CHF 100 million deposit limit for payment institutions. The license for crypto-institutions will be based on the license for securities firms, but scaled down to reflect the fact that crypto-institutions don’t provide services with financial instruments, while also applying strict requirements to prevent conflicts of interest.
These measures may signal a shift from static, restrictive licensing toward technology-neutral regulation that could finally make Switzerland’s fintech regime competitive, bringing it up to speed with the fast-paced technological advancements that are being made. By aligning with global standards and providing room for growth, the proposed reforms could revitalize the sector and attract international innovators.
The European Union’s multi-tier licensing system, coupled with PSD2-based payment frameworks and MiCA, has proven to be a powerful growth engine for fintechs. Swiss policymakers appear to have drawn inspiration from this approach: the proposed payment institution license would finally create a pathway similar to the EU’s e-money license – one that allows scaling without requiring a full banking charter.
