Swiss Federal Council last week adopted an amendment of the Banking Ordinance (BankO), which aims to reduce the barriers to entry for fintech firms and boost the competitiveness of the Swiss financial center.

To be effective from 1 August 2017, the amendment to the BankO aims to regulate fintech firms which provide services outside normal banking business.

Importantly, the amendment envisages the creation of an “innovation area”. According to the announcement, firms accepting public funds up to 1 million Swiss francs will be exempt from authorization. It further clarified that the depositors with these firms would not be protected under the deposit protection rules.

“The regulatory simplifications apply not only for fintech firms, but also for established financial service providers. Banks should also be able to use the innovation area. This will ensure that the competition amongst the financial market participants is not distorted. Furthermore, the amendments have no influence on the applicability of the Anti-Money Laundering Act”, the Federal Council said.

It further stated that it will continue to watch latest developments in the fintech sector, adding that the work on legal qualification of digital currencies, such as bitcoin, has been taken over.

“The Federal Council will continue to closely follow further developments in the areas of digitalisation and fintech, and examine further regulatory measures. The corresponding work, i.e. on clarifying the legal qualification of virtual currencies, has been taken over and is to be swiftly pursued”, it added.

The city of Zug in Switzerland has been spearheading digital currency initiatives in the country. It kicked off a pilot project last July, allowing people to pay their fees in digital currency bitcoin. Later in December, it announced its intention to make the project permanent. More recently, Zug announced plans to offer blockchain-based digital identity to residents.