Swiss Federal Council aims to improve framework conditions for DLT/blockchain

Switzerland’s Federal Council announces that, at a meeting held earlier today, it adopted the dispatch on the further improvement of the framework conditions for DLT/blockchain. The proposal is aimed at increasing legal certainty, removing barriers for applications based on distributed ledger technology (DLT) and reducing the risk of abuse.

In December 2018, the Federal Council published a report on the legal framework for blockchain and DLT in the financial sector. 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 highlighted 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 seeks to beef up 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 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.

Finally, 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.

In March this year, Switzerland’s Federal Council launched a consultation on the adaptation of federal law to developments in DLT.

Today, the Council said that some 80 responses were received during the consultation process. All the participants welcomed the Federal Council’s proposal in principle.

The Federal Council has now adopted the dispatch on the adaptation of federal law to developments in distributed ledger technology. The proposal has been revised and refined in a number of areas as a result of suggestions received during the consultation process. This federal legislation, which is designed as a blanket framework, proposes specific amendments to nine federal acts, covering both civil law and financial market law.

The Parliament will probably examine the proposal for the first time in early 2020.