Switzerland: Cuckoo clocks, chocolates and ICOs?

Harry Lime in Graham Greene’s The Third Man “You know what the fellow said — in Italy, for thirty years under the Borgias, they had warfare, terror, murder and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace — and what did that produce? The cuckoo clock.”

Our new Swiss node

Otonomos has recently moved to Switzerland from Singapore, with the bulk of its development work done out of Toronto and its legal engineering centred in the U.S. and London.

Precedent: The Ethereum Foundation ETH ICO

In earlier disclosures about its finances, the Ethereum Foundation indicated it spent over half a million dollars in legal advice before settling on the Swiss Foundation for its token sale.

Buyer remorse?

However, many who set up a Swiss Foundation, including the Ethereum Foundation itself, now seem to have a degree of buyer remorse.

“It turns out that creating a Swiss foundation to raise hundreds of millions of dollars in an ICO doesn’t mean you can actually use the money.”

The founders of Tezos are finding this out the hard way: they can’t directly access the $1.3 billion controlled by the Foundation they created. It seems an “autonomous legal entity” means exactly that:


“The trend of U.S. blockchain startups creating Swiss foundations is over. It makes no more sense than a Swiss startup incorporating a U.S. non-profit in Hackensack, N.J.”

More teams now seem to come round to this view, some only on the morning after, and we have received anecdotical evidence that the doyen of Swiss ICO work, the legal firm MME, is now seeing incorporations of Swiss Foundations taper off.

Is there a good alternative?

Singapore is often mentioned as an alternative to Switzerland, with its “Foundation” used by a fair number of sponsor teams for their token offering.

  1. First, a CLG is a public company in Singapore. This has a number of consequences, including ensuring compliance with additional requirements on the maintenance of a register and index of members, company administration and accounts, extra requirements regarding the qualifications of a company secretary, and a longer notice period for holding a general meeting.
  2. A CLG, as a public company, is subject to more stringent audit requirements. Whilst this may be perceived as a benefit to having a CLG as a vehicle for token offerings compared to the more common Singapore-incorporated private limited company (Pte. Ltd.), an audit is expensive and often painful as legacy auditing firms use rather antiquated techniques and have no reference framework when dealing with tokens as assets of a company.
  3. Finally, there is the perception that CLGs are non-profit. However, as a legal matter, there is in fact no requirement that CLGs are not for profit entities: Using a CLG as a vehicle for a token offering would not address token holders’ concerns on restrictions on distribution of capital to members (shareholders) of the CLG, as a CLG may still distribute profits to its members. If CLGs would wish to become a “registered charity” in Singapore to come closer to a Swiss Foundation, it would add significantly to its governance burden. Most prohibitively, according to the Charity Act, its purpose would have to “wholly or substantially to the community in Singapore”…

An unusual suspect: The US (and Canada)

Who else is out there? Perhaps unexpectedly, the United States is less bad than often painted, at least if you are clearly intent on offering tokenised securities and want to structure your ICO unambiguously as a securities offering.

Meanwhile, in Canada

Then there is of course Canada, which people (read: Canadians) like to say has all of the good of the States without any of the bad!

A genuine multi-purpose ICO/TGE vehicle

A relatively new vehicle which since its inception has been very popular as an entity for asset protection by individuals and family offices is the Curaçao Private Foundation (“SPF”).

The long arm of securities laws

Finally, with the risk of patronising readers, one give-away observation: lots of clients come to us in the rather naïve belief that by setting up an entity in a specific jurisdiction, only the laws of that jurisdiction apply.



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Otonomos helps doers and investors in the crypto and blockchain community around the world form, fund and govern their legal entities, both offchain and onchain