As at March 2019
The Federal Council wants to further improve the framework conditions so that Switzerland can exploit the opportunities offered by digitalisation. Distributed ledger technology (DLT) and blockchain technologies are among the remarkable and potentially promising developments in digitalisation. Against this backdrop, the Federal Council published a report on the legal framework for blockchain and distributed ledger technology (DLT) in the financial sector on 14 December 2018. In order to quickly address the existing areas requiring action, the Federal Council decided at the same time to have a consultation draft prepared. On 22 March 2019, the Federal Council initiated the consultation on the adaptation of federal law to developments in distributed ledger technology.
The analysis of an interdepartmental working group on the money laundering and terrorist financing risks posed by crypto assets was likewise published on 14 December 2018. Further regulatory developments in the fintech field include the introduction of a fintech authorisation and the creation of a sandbox.
Switzerland as an attractive and morally sound location
It is predicted that distributed ledger technology and blockchain technology have considerable potential for innovation and enhanced efficiency both in the financial sector and in other sectors of the economy. Switzerland is currently one of the leading locations in the area of DLT and blockchain. Especially in the financial sector, a growing fintech and blockchain ecosystem has developed in Switzerland in recent years.
For Switzerland as a business location, it is crucial for the legal framework to enable innovation so that the potential of new technologies can thrive. At the same time, Switzerland's integrity and good reputation as a business location must continue to be guaranteed in this area too.
Federal Council report on blockchain/DLT
The Federal Council report of 14 December 2018 on the legal basis for blockchain/DLT provides an analysis of the relevant framework conditions, clarifies the need for action and proposes concrete measures. It is based on the work of the blockchain/ICO working group, which was set up by the Federal Department of Finance (FDF) in January 2018 and which also consulted the fintech and financial sector as part of its work. The analyses show that there is no need for fundamental adjustments to the Swiss legal framework, but that there is still a need for specific adjustments. The Federal Council has instructed the FDF, in collaboration with the Federal Department of Justice and Police (FDJP), to draw up a consultation draft. This consultation was initiated on 22 March 2019 and runs until the end of June 2019. The consultation draft has the following aims:
- · In the Swiss Code of Obligations, the possibility of an electronic registration of rights is to be created, which can guarantee the functions of securities. This is intended to increase legal certainty in the transfer of DLT-based assets.
- · In the Federal Act on Debt Collection and Bankruptcy, the segregation of cryptobased assets in the event of bankruptcy is to be expressly regulated, also to increase legal certainty.
- · In financial market infrastructure law, a new authorisation 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.
- It should also be possible in future to obtain a licence to operate an organised trading facility as a securities firm. This requires an adaptation of the future Financial Institutions Act.
Analysis of money laundering risks
On 14 December 2018, the Federal Council also took note of a report by the interdepartmental coordinating group on combating money laundering and the financing of terrorism (CGMF) on the money laundering and terrorist financing risks posed by crypto assets and crowdfunding. The analysis shows that cryptobased assets pose a threat in the area of money laundering and terrorist financing. Due to the small number of cases, however, the real risk in Switzerland cannot be estimated conclusively. Nevertheless, Switzerland has a comprehensive regulatory system in place, which is why further improvements need to be addressed with internationally coordinated measures. The Federal Council has also instructed the FDF to examine whether anti-money laundering law should be adapted with regard to certain forms of crowdfunding. Details can be found in the explanatory report on the consultation draft of 22 March 2019.
Further regulatory developments
On 30 November 2018, the Federal Council created a new authorisation category for fintech. From 1 January 2019, companies that operate beyond the core activities characteristic of banks will thus be able to accept public funds of up to a maximum of CHF 100 million on a professional basis subject to simplified requirements. This new authorisation is also of interest to the fintech and blockchain sectors, among others. Moreover, an innovation area or sandbox has been created in banking law. This change should allow firms to try out a business model before they are finally required to obtain authorisation in the case of public funds of over CHF 1 million.