An announcement has been made by the Swiss government on taking a new legislative approach to the regulation of blockchain. It will give a legal framework regarding distributed ledger technology (DLT). According to the report the document acknowledges blockchain technology as one of the most significant recent developments needed for the country to enhance its financial sector. The Swiss Federal Council’s main aim is on “ensuring the integrity and reputation of Switzerland as a financial center” and to make it possible for the country to “exploit the opportunities offered by digitalization.”
The Swiss State Secretariat for International Finance (SIF) announced the Federal Council’s adoption of a report titled Legal Framework for Distributed Ledger Technology and Blockchain in Switzerland. They will be working in developing laws for new technologies especially distributed ledger technology and blockchain innovation.
On the 14th the Swiss State Secretariat released a report regarding “remarkable and potentially promising developments… for innovation and enhanced security,” for blockchain. The report talks about the fundamental uses of blockchain and DLT tech and examines the needed framework especially the financial market law aspect and classifying tokens as assets. “[The Federal Council] 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 blockchain companies.”
The government aims to create a legal outline in such a way that the country can continue to develop into a leading place for blockchain technology. The Federal Council also included that it wants those financial transactions that are decentralized to have some place in the legal code.
According to the report a proposal to give discretionary powers to FINMA Financial Market Supervisory Authority so that regulations concerning trading platforms that are decentralized will be loosened. Luzius Messer a Swiss economist is enthusiastic about this and wrote, This shows once again how the traditional Swiss approach of having principle-based laws that give a lot of discretion to citizens and regulatory agencies are much more innovation-friendly than overly detailed European-style laws. So far the proposed changes will include:
- Altering the Collective Investment Schemes Act to include a new type of “limited qualified investment funds”
- Data will be recognized as an asset and would assist Swiss courts to properly manage legal disputes that are to do with distribution of digital assets.
- Widen the Anti-Money Laundering Act so that it will also include decentralized exchanges. It will cover activities related to cryptocurrencies as well as initial coin offerings (ICOs) “The general principles of the Anti-Money Laundering Act also apply to crypto-based assets”
- A new “authorization category” created to allow FINMA the choice to loosen regulations concerning decentralized securities traders in the blockchain sector
- Modifying the Financial Institutions Act and the Financial Market Infrastructure Law so that they are more open and flexible towards blockchain proposals
- 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 government of Switzerland wants to accommodate the blockchain sector within its existing financial laws. Since 2016 the government of Switzerland has been working on blockchain regulations and in 2017 the council was in the search of consultations regarding regulatory changes for the industry to account for finetech as well as blockchain. FINMA introduced a fintech license which will apply to blockchain and cryptocurrency based firms.
The Council suggests “creation of a new authorisation category for crypto-based assets.” There is no mention as to what the future will hold but it does state the necessity for “adjustments” to the current framework regarding financial regulations. “This paradigm shift (i.e. the shift from centralised to decentralised structures) also poses major challenges for the regulator[s]. The same aims will apply in decentralised structures as in centrally organised financial markets.”
