Switzerland’s Federal Council released on December 14 a report on the legal framework for blockchain and distributed ledger technology (DLT) in the financial sector. The report argues that “Switzerland’s legal framework is already suitable for dealing with business models based on DLT and blockchain”, but that several adjustments need to be made.
The Swiss government has advised regulators not to create new legislations but instead make adjustments to existing laws to accommodate companies in the blockchain and cryptocurrency space. The amendments should focus on enhancing Switzerland’s position as a blockchain-friendly country, the Swiss Federal Council said last week.
The Federal Council said it wished to exploit the opportunities offered by digitalization and blockchain, citing the potential for innovation and enhanced efficiency in the financial sector and other sectors of the economy.
In order to do so it’s working on creating “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.” At the same time, it noted the importance of combatting abuses and ensuring the integrity and good reputation of Switzerland as a financial center and business location.
The Federal Council cited the need for an optimal framework conducive to innovation and new technologies, and the need to pursue a principle-based and technology-neutral legislative and regulatory approach.
In particular, the Federal Council is proposing an amendment to securities law. The planned legislative amendment would enable the “legally secure transfer of uncertificated securities by means of entries in decentralized registers.” The amendment would be designed as technology-neutral as possible.
In financial market infrastructure law, it is proposing the creation of a new authorization category for infrastructure providers in the blockchain/DLT area. Related amendments to the Financial Market Infrastructure Act and the new Financial Institutions Act should focus on “creating more flexibility in order to better meet the requirements of blockchain/DLT applications”, it said.
The Federal Council has already instructed the Federal Department of Finance (FDF) and the Federal Department of Justice and Police (FDJP) to draw up a consultation draft in the first quarter of 2019 on the cited proposals.
Industry participants welcomed the Federal Council’s new blockchain strategy. Dr Mattia Rattaggi, chair of the policy and regulatory working group at the Crypto Valley Association (CVA), said the report is “entirely in tune with its goal to create the best possible framework conditions for ‘Crypto Nation Switzerland,’ while underlining the country’s integrity and reputation as a financial center and business location.”
“We feel that this approach best represents the principle of technological neutrality and is in line with the position taken by the CVA in the consultation process. Crucially, this approach ensures maximum consistency within the current legal framework while keeping it principle-based and flexible, while allowing changes to be adopted on a ‘need-to-regulate’ basis.”
Angel Versetti, co-founder and CEO of Ambrosus, a blockchain and Internet-of-Things platform for food and pharmaceutical supply chains, cited the importance of not stifling innovation and decentralization with excessive regulations, red tape and bureaucracy, “because this will reduce the democratic value proposition that blockchain offers.”
He added that Switzerland should consider only regulating companies that do business with retail customers and treat decentralized protocols as a common good.