On 19 October 2020, the Swiss Federal Department of Finance (FDF) began the consultation on blanket blockchain rules and regulations.This is a continuation of Switzerland’s recent efforts to regulate blockchain and distributed ledger technology (DLT) without stifling innovation.
In late September this year, the Swiss Parliament unanimously approved a Federal Act on the Adaptation of Federal Law to Developments in DLT, which amends several provisions in ten existing laws. This Act aimed to allow Switzerland to continue developing as a leading country for blockchain and DLT companies. To incorporate these amendments into law, a prior consultation with interested parties is needed.
According to the FDF’s consultation procedure report, the amendments suggested by the Parliament can be summarized as follows:
- To create the option of electronic registration of qualified stock rights. This secures the legal basis of trading rights utilizing electronic registers.
- To expressly regulate the segregation of crypto assets in the event of certain types of bankruptcy and the segregation of data, increasing market security. The Fintech license has also been expanded to encapsulate certain ‘bank-like’ business models related to crypto-based assets that are currently not regulated.
- To create a new license category for DLT-based trading systems, offering services in accounting and trading, custody, and settlement. These services will be available to already regulated-financial market players and now also to private customers. DLT-based trading systems are to be subject to the Money Laundering Act.
- To be able to obtain a license as a securities firm to operate an organized trading system.
Following the consultation through to 2 February 2021, the Federal Council expects to be able to bring these amendments into force in August 2021.
Switzerland began making preparations for blockchain and DLT regulation as early as 2018, with the Swiss Federal Council publishing a report on the technologies and the law in December that year. The report concluded that while the existing legal framework works well enough, some more adjustments were indeed needed.
In early September this year, the Swiss parliament passed another Act, the Blockchain Act, to update existing corporate and financial regulations to make way for blockchain and DLT. This law is expected to come into effect before the DLT blanket provisions in early 2021.