Improve blockchain conditions - consultation underway

At the end of 2018, the Federal Council adopted a report on the legal framework for blockchain and distributed ledger technology (DLT) in the financial sector. In doing so, it emphasized that it wants to create the best possible framework conditions so that Switzerland can establish and further develop itself as a leading, innovative and sustainable location for fintech and DLT companies. It also wants to consistently combat abuses and ensure the integrity and good reputation of Switzerland as a financial and business center.

Consultation proposals

Among other things, the report showed that the Swiss legal framework is already well suited to dealing with new technologies including DLT, as the Federal Council writes. However, it also points to a need for action in certain areas. In the report announced in December 2018 and now available Consultation draft the Federal Council proposes the following adjustments in particular:

• In the Code of Obligations, the possibility of electronic registration of rights is to be created, which can ensure the functions of securities. 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 explicitly regulated - also in order to increase legal certainty.
• A new authorization category for so-called "DLT trading systems" is to be created in financial market infrastructure law. These are to be able to offer regulated financial market players and also private clients services in the areas of trading, settlement, clearing and custody with DLT-based assets.
• Finally, it should also be possible in the future to obtain a license as a securities firm for the operation of an organized trading system. This will require an amendment to the future Financial Institutions Act.

Money laundering and terrorist financing

In the area of combating money laundering, the Federal Council sees a need for clarifications of current practice. However, these adjustments at the ordinance level are not part of this consultation draft, but are to be integrated into the planned amendment of the Money Laundering Ordinance as part of the ongoing revision of the Money Laundering Act.

The Federal Council has also had it clarified whether the legislation in the area of prevention of money laundering and terrorist financing should be adapted with regard to crowddonating and crowdsupporting platforms. At the moment, relatively modest volumes of donations are collected via these platforms. In addition, other jurisdictions currently also refrain from regulating such activities. The Federal Council is therefore of the opinion that it would currently be disproportionate to subject crowddonating and crowdsupporting platforms to the Money Laundering Act. It will continue to monitor developments and, if necessary, reassess whether such platforms should be subject to the Anti-Money Laundering Act.

Source: Federal Council