The government of Switzerland wants to accommodate the blockchain sector within its existing financial laws.
The country’s Federal Council issued a report on Friday, providing a legal framework for distributed ledger technology (DLT), or blockchain,, stating that Switzerland’s existing rules are well suited to dealing with such new technologies, but there is still a need for some amendments.
Firstly, the council has proposed an amendment to the country’s securities law to increase the legal certainty of crypto tokens. “Since an entry in a decentralised register accessible to interested parties can create publicity similar to the ownership of a security, it seems justified to attach similar legal effects to this entry,” the highest executive authority of the Swiss Confederation explained.
The council also wants to segregate crypto assets from the insolvent debtors’ total estate in bankruptcy proceedings. However, because under the country’s existing Debt Enforcement and Bankruptcy Act (DEBA) it is not clear whether these assets can be segregated, the council said there is a “great need for legal certainty” for the parties involved and thus a corresponding change is proposed in the DEBA act.
Further, the government body has proposed the creation of a new “authorization category” for infrastructure providers in the blockchain sector, and will make amendments to its Financial Market Infrastructure Act accordingly. Currently, the council has not yet proposed any specific changes, as the central definitions of the terms “securities” and “derivatives” in financial market regulations are also relevant for blockchain-based business models, it said.
Regarding the country’s Anti-Money Laundering Act, the council said the legislation is currently adequate enough to also cover activities related to cryptocurrencies and initial coin offerings (ICOs). “The general principles of the Anti-Money Laundering Act also apply to crypto-based assets.” it said, adding that there is no need for a “fundamental revision” at present.
The Swiss government has been working on blockchain regulations since 2016, when the country’s Federal Department of Finance outlined its plans to regulate fintech. Later in early 2017, the council itself was seeking consultations on regulatory changes for the domestic financial industry to account for fintech including blockchain.
Most recently, Switzerland’s Financial Market Supervisory Authority (FINMA) introduced a new fintech license with “relaxed” requirements that is applicable to blockchain and cryptocurrency-based firms.
Swiss Federal Palace image via Shutterstock