VQF on Switzerland’s Crypto AML and Travel Rule Landscape

Tobias Eberle, CEO of Switzerland’s leading self-regulatory organisation, the Financial Services Standards Association (VQF), and VQF’s Felicitas Sicardi, Legal Counsel and SME, share their thoughts on Switzerland’s crypto AML, SRO and Travel Rule landscape in a recent interview with 21 Analytics.

Switzerland has long been recognised as a leading jurisdiction for financial innovation, but its crypto-friendly reputation does not mean lighter regulation. As digital assets have grown, so has the need for specialised supervision and stronger AML controls.

The increased use of digital assets has also introduced new compliance challenges, from blockchain transaction monitoring and wallet ownership verification to sanctions screening, cross-border activity, and Travel Rule implementation.

In this conversation with Tobias Eberle and Felicitas Sicardi, we explore how the Swiss Self-regulatory Organisation (SRO) model is adapting to digital assets, the most common AML deficiencies among VASPs, the challenges of Swiss substance, and the practical hurdles of Travel Rule compliance.

The VQF on Navigating Crypto Compliance in Switzerland  

Q: How has the VQF’s regulatory focus shifted since 1998, particularly with the rapid rise of digital asset firms?

When the VQF started in 1998, most of our members were traditional financial intermediaries such as fiduciaries, asset managers, payment providers and credit businesses. The core AML obligations have not changed, but the financial market and the risk landscape certainly have.

Over the last decade, we have seen a significant increase in digital asset and crypto-related business models. As a result, the VQF made the decision to reinforce the supervisory focus and specialisation of our employees also to the field of blockchain transaction monitoring, wallet ownership verification, sanctions screening, the Travel Rule and cross-border crypto activity. The underlying AML principles remain the same, but applying them to digital assets requires additional expertise and a more technology-driven supervisory approach. 

Q: How many of the VQF’s members are active in digital assets?

More than 150 of our 600+ supervised entities are VASP-related. The entities are in various states of maturity: start-ups to established players. However, digital asset companies now represent a significant and growing part of our membership base.

The increase reflects Switzerland’s position as an international hub for blockchain and digital asset innovation, particularly in Zug and Lugano. Today, we supervise a broad range of crypto-related businesses, from OTC brokers and payment providers to more specialised virtual asset service providers (VASPs). 

The supervised entity (SE) is expected to take up its business activity within 1-2 years after the affiliation. This is in line with other regulations such as AIA/FATCA. We do know that certain third parties like banking partners or IT-providers seek the affiliation confirmation before entering a contract with the VASP. This is also one of the reasons why certain SEs require more time to commence their business activities, making the 1-2 year timeframe appear realistic rather than assuming that the activity is taken up immediately after affiliation.

Q: What specific supervisory approaches or support structures differentiate the VQF from other Swiss SROs?

One of our strengths is that we have been supervising a very diverse membership base from the very beginning and are not limited to a specific business model in the para-banking sector.

That gives us practical experience across different types of financial intermediaries, including emerging digital asset businesses.

Our staff combines profound know-how and practical expertise with a strong commitment to continuous learning. Regular professional training and further education are an integral part of our culture and are actively supported by the VQF.

We place considerable emphasis on accessibility and dialogue. Members have direct points of contact, receive guidance on regulatory developments, can participate in training programmes and benefit from supervisory staff who are familiar with their specific business models. Particularly in the field of digital assets, where regulation is evolving rapidly, this close interaction is often highly valued by members and is of critical importance given the risks associated with certain business models.

Q: When your auditors examine digital asset firms today, what are the most common AML deficiencies they consistently flag?

The most common findings generally do not relate to the technology itself. Often, they involve the same AML principles that we see in traditional finance.

Examples include incomplete risk assessments, insufficient documentation of source of funds and source of wealth, weaknesses in transaction monitoring, inadequate identification of beneficial owners and shortcomings in the treatment of higher-risk business relationships. In the crypto sector specifically, companies sometimes underestimate the importance of documenting wallet ownership checks and the rationale behind their risk-based decisions.

The challenge is rarely a lack of regulation and knowledge. More often, it has to do with practical implementation, documenting the control measures that have been carried out, and understanding the risks.

Q: For an international VASP looking to set up a Swiss entity, what is the most common misunderstanding they have about the Swiss AML framework and SROs?

A common misconception is that Switzerland is somehow less regulated because it is innovation-friendly.

In reality, Switzerland applies robust AML requirements, and companies in the digital assets sector are expected to meet the same or even higher standards of customer due diligence, transaction monitoring and reporting as other financial intermediaries.

Another frequent misunderstanding concerns the concept of substance. Some international VASPs assume that establishing a Swiss entity and joining an SRO is primarily an administrative exercise. In practice, we place significant importance on ensuring that the Swiss entity is not merely a legal shell. The relevant activities, management functions and decision-making processes must actually be carried out from Switzerland.

As part of our admission process, we assess whether the applicant has, or is building, an organisational structure in Switzerland that is adequate with its business model and risk profile. This includes an appropriate local presence, qualified personnel and sufficient resources to effectively discharge its AML obligations. Strengthening the Swiss substance of the business is, in fact, one of the most common conditions we impose in admission procedures.

At the same time, we recognise that many applicants are still in a start-up or growth phase. We are therefore granting companies a reasonable period of time to establish their presence in Switzerland and set up their organisational structure. However, we place considerable emphasis on the effective implementation of these commitments. It is not sufficient to present a business plan on paper; we expect companies to demonstrate tangible progress and to grow their Swiss-based resources in line with the scale and risk profile of their activities.

Membership in an SRO therefore comes with ongoing supervisory obligations, periodic audits and regulatory scrutiny.

Q: Unlike the US SRO FINRA's broad market oversight, the VQF focuses strictly on AML. Does this difference impact a compliance officer's daily reporting burden? If so, how?

Yes and no.

From a supervisory perspective, the VQF's mandate is focused on AML and counter-terrorist financing obligations. As a result, interactions with the SRO and related reporting requirements are primarily centred around risk assessments, customer due diligence, transaction monitoring, suspicious activity reporting and audit preparation.

However, in practice, a compliance officer's role extends far beyond AML and CTF. They are expected to be true all-rounders. They need a solid understanding of the broader regulatory framework, continuously monitor legal and regulatory developments across different jurisdictions and assess how these developments affect the company's operations.

To ensure compliance with Swiss AML requirements, companies must establish an appropriately staffed AML function. Depending on the organisation, this function may be performed by the compliance officer, who simultaneously acts as the AML officer, or by another individual or external specialist with specific AML responsibilities.

In our experience, the reporting burden itself does not fundamentally differ from one company to another. What drives the workload is primarily the company's risk appetite, the complexity of its business model, the extent of its international activities and the market-related customer behaviour. The more cross-border relationships, higher-risk customers and jurisdictions involved, the greater the compliance and documentation effort required to maintain an effective AML framework.

Q: Now that MiCA is fully in force across the EU, how can the Swiss SRO model adapt to remain globally competitive?

The Swiss model has traditionally been characterised by proportionality, flexibility and a close interaction between supervisors and regulated entities. These strengths remain important and continue to make Switzerland an attractive jurisdiction for innovative financial services businesses.

At the same time, maintaining competitiveness should not be understood as maintaining a lighter regulatory framework. Looking at current legislative and political developments, the trend is rather towards increasing regulatory expectations and more comprehensive compliance requirements. This is driven not only by developments in the European Union, including MiCA, but also by evolving international standards and expectations.

In particular, Switzerland is preparing for the FATF mutual evaluation scheduled for 2027. As with previous evaluations, this process will place significant focus not only on the legal framework itself but also on its implementation and practical effectiveness. We therefore expect that policymakers and regulatory authorities will continue to give the necessary attention to strengthening AML and compliance standards where required.

In our view, Switzerland's competitiveness should therefore not be based on being less regulated than other jurisdictions. Its strength lies in providing regulatory clarity, legal certainty, high supervisory standards and a pragmatic environment for innovation.

That said, the current political and regulatory discussions and geopolitics do create a certain degree of uncertainty. Given the ongoing legislative developments, parts of the future framework are not yet fully foreseeable. From the perspective of some market participants, this may reduce Switzerland's attractiveness compared to jurisdictions where the long-term regulatory model is already more clearly defined. In some cases, it may also be seen as an argument against pursuing SRO membership.

However, this is not what we currently observe in practice. We continue to receive a significant number of admission enquiries from both Swiss and international companies for their Swiss branch. Many market participants still actively choose the existing Swiss framework, including the established system under which VASPs can operate under the supervision of a FINMA-recognised SRO. This model is well known, has proven itself over many years and continues to offer an efficient and credible way to enter the Swiss market.

Q: Switzerland has been a pioneer in enforcing the Travel Rule. What are the biggest hurdles your members still face when implementing it, and where do they get it wrong?

Switzerland was among the first jurisdictions to implement and actively enforce Travel Rule requirements for virtual asset service providers. As a result, we generally see a relatively mature level of implementation among Swiss companies. Many VASPs have established processes, governance frameworks and technical solutions, and the Travel Rule has become a well-integrated part of their compliance framework.

That said, we still encounter companies that do not fully grasp all aspects of the requirements, particularly when it comes to cross-border transactions, self-hosted wallets and the interaction between technical solutions and the underlying AML obligations. For these companies, we strongly recommend seeking specialised advice and relying on established industry standards and proven implementation solutions rather than developing fully customised approaches.

One of the main challenges remains the interaction with counterparties in different jurisdictions, where implementation standards are not always fully aligned. However, we are currently seeing encouraging international efforts towards greater harmonisation of Travel Rule requirements and implementation practices. In our view, this increasing convergence will significantly facilitate compliance and operational efficiency for VASPs operating across borders in the coming years.

It is also important that companies avoid breaches of Travel Rule and AML requirements. These obligations should not be viewed as merely technical or administrative formalities. Deficiencies or violations may lead to supervisory measures and sanctions by the SRO, depending on the nature and severity of the findings. For that reason, companies should ensure that their Travel Rule framework is not only implemented formally, but also effectively embedded in their day-to-day compliance processes.

21 Analytics and the VQF 

21 Analytics is a passive member of the VQF, a FINMA-recognised Swiss SRO with more than 150 VASP-related entities among its 600+ supervised members. 

As a VQF member, 21 Analytics is part of a Swiss ecosystem committed to robust AML and CTF standards for digital assets. VQF’s growing focus on areas such as blockchain transaction monitoring, wallet ownership verification and the Travel Rule reflects the increasingly specialised compliance needs of the crypto industry, an area in which 21 Analytics provides sophisticated Travel Rule compliance technology.

About the VQF

The Financial Services Standards Association (VQF) offers a full range of compliance services to financial intermediaries in the parabanking sector in Switzerland. As a centre of competence, the Association provides numerous supervisory, inspection, audit, training and advisory services to its members. 

In addition to its capacity as an SRO, the VQF provides further services concerning legal consulting for financial intermediaries to the Anti-Money Laundering Act (AMLA).

As a Self-Regulatory Organisation (SRO) officially recognised by the Federal Financial Market Supervisory Authority (FINMA), the VQF is obliged to supervise its members with regard to the combating of money laundering and the prevention of the financing of terrorism.

Find out more about the VQF