The Federal Council of Switzerland is consulting on the adaptation of federal law to the developments in distributed ledger technology (DLT). It thereby wants to increase legal certainty, remove hurdles for DLT-based applications, and limit risks of misuse. The draft serves to further improve the regulatory framework for DLT in Switzerland, particularly in the financial sector. The consultation will end on June 28, 2019.
The Federal Council, in December 2018, had adopted a report on the legal framework for blockchain and DLT in the financial sector. The Federal Council emphasized that it wants to create the best possible framework conditions so that Switzerland can establish itself and evolve as a leading, innovative, and sustainable location for fintech and DLT companies. Moreover, it wants to consistently combat abuses and ensure the integrity and good reputation of Switzerland as a financial center and business location. Among other things, the report showed that Switzerland's legal framework is already well-suited to dealing with new technologies, including DLT. However, it also pointed out the need for selective action. In the consultation draft, the Federal Council proposes the following adjustments:
- In the Swiss Code of Obligations, the possibility of an electronic registration of rights that can guarantee the functions of negotiable securities is to be created. This is intended to increase legal certainty in the transfer of DLT-based assets.
- In the Federal Law on Debt Collection and Bankruptcy, the segregation of crypto-based assets in the event of bankruptcy is to be expressly regulated, also to increase legal certainty.
- In financial market infrastructure law, a new authorization category for so-called "DLT trading facilities" is to be created. These are intended to be able to offer regulated financial market players and private customers services in the areas of trading, clearing, settlement and custody with DLT-based assets.
- Finally, it should also be possible in future to obtain a license to operate an organized trading facility as a securities firm. This requires an adaptation of the future Financial Institutions Act.
Comment Due Date: June 28, 2019
Keywords: Europe, Switzerland, Banking, Fintech, Distributed Ledger Technology, Blockchain, Swiss Federal Council
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