Consultation on Improving Framework Conditions for Blockchain/DLT

It’s spring and Swiss laws are being sent to the gym. The goal of this exercise is to bring the Swiss Code of Obligations, the Federal Law on Debt Collection and Bankruptcy, and the financial market laws in best shape for the digital future. Distributed ledger technology (DLT), the technology behind distributed electronic registers, has been identified by market participants and the Federal Council as promising innovation accelerator in the digital realm. On March 22, 2019, the Federal Council has initiated the consultation on the adoption of federal law to DLT developments. But let’s begin with some background. The DLT story started almost exactly ten years ago when the global financial crisis peaked and public trust in traditional financial players decreased dramatically. This was the time, a «system based on cryptographic proof instead of trust» was introduced to the world. Today, Bitcoin is general knowledge. The same is true for Blockchain, the technology behind Bitcoin and also a form of DLT, that promises a future without financial intermediaries. As ICOs, a new funding source for businesses by crowd-sale of digital assets (often called Token), soared and authorities worldwide intervened by bringing law into the crypto world it became clear that legal certainty was needed. The Swiss Financial Market Authority, FINMA, was among the first movers by publishing guidelines on ICOs. In addition, an expert group established by the Federal Council identified in a report several hurdles of Swiss laws that hinder innovation. A threshold issue is whether Tokens are a claim or uncertificated security under Swiss law and, therefore, a transfer requires a written assignment. The now proposed adoption of Swiss laws intends to remove hurdles for DLT-applications and increase legal certainty. The Federal Council proposes the introduction of a new instrument in the Code of Obligations that allows for the electronic registration and transfer of certain rights (called «DLT-Wertrecht»). In addition, the proposals include new rules for crypto assets in bankruptcy events and a new authorization category for DLT trading facilities. The consultation will last until end of June 2019.