The rich Alpine state’s finance minister is planning to freeze Russian-owned crypto assets and enterprises.
The Swiss federal government seeks to freeze cryptocurrency assets held by Russian persons and businesses within Swiss borders. These penalties, in addition to any European Union-related restrictions, penalize Russian citizens and businesses.
Switzerland has previously adopted EU sanctions.
The crypto freeze follows sanctions imposed on Moscow by the European Union in Brussels in response to Russia’s foray into Ukraine. The EU said on Wednesday that it would take steps to prevent Russia from using cryptocurrency to mitigate the impact of economic sanctions. “We are taking measures, particularly with regard to crypto assets, which should not be exploited to avoid the financial sanctions imposed by the 27 EU countries,” French Finance Minister Bruno Le Maire said.
Guy Parmelin, Switzerland’s finance minister, has confirmed the acceptance of four EU measures. “As of today, Switzerland has adopted and implemented all four of the EU’s sanctions packages,” he stated. Over 200 Russians had their bank accounts and physical valuables blocked by Swiss authorities in the last week.
How will they thaw cryptocurrency assets?
The Swiss finance ministry aims to defend the integrity of Switzerland’s blockchain industry by freezing crypto assets, given that Switzerland and neighboring state Liechtenstein have become crypto centres in recent years, home to around 1,128 blockchain enterprises.
It remains to be seen how the Swiss authorities would implement the Finance Minister’s regulations, given that some cryptocurrency holders want to keep their money in a non-custodial crypto wallet. A public and private key infrastructure oversees crucial parts of transmitting and receiving payments in cryptocurrency wallets. Anyone other than the holder has no access to the public and private keys of a non-custodial wallet. Only the owner makes themselves visible if they move their bitcoin through restricted routes. “If someone possesses their own crypto key, it will be nearly hard to identify them wherever they are,” says a senior Swiss finance official.
When crypto exchanges like Coinbase handle crypto assets, the assets are held in custodial wallets, which means Coinbase has access to the public and private keys in a customer’s wallet. Exchanges can only restrict access to user funds in this case. “However, if they use crypto services–funds, exchanges, and so on–these are service points we can target,” the official stated.
Even in these situations, Swiss companies would need a legal basis to implement asset freezing measures, as Kraken CEO Jesse Powell pointed out in a recent Twitter thread, because freezing assets indiscriminately would be detrimental to business. The exchange would also have to be registered with a regulatory agency in the country imposing the freeze, with legal standards outlining how and when an exchange would be obliged to restrict access for individual users.
The Financial Market Supervisory Authority is Switzerland’s regulating authority, and all crypto exchanges must receive a license from the body in order to function. The Blockchain Act, which regulates how cryptocurrencies can be exchanged and how exchanges in the country should be run, was passed by the government in 2020.