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The Swiss government has announced a broad-based blockchain strategy that aims to create a legal basis for the new technology. The reports suggest changing the existing laws, rather than creating new legislation, in an attempt to improve Switzerland's status as a blockchain-friendly country.
The main objective of the strategy is to incorporate decentralized digital tokens into the Swiss corporate infrastructure, especially in the financial sector. One proposal is to eliminate regulatory barriers for trading securities (such as stocks, bonds or real estate) on blockchain platforms. This would create a new regulatory category along the lines of the recent fintech laws, which allow certain financial assets to be implemented by technology start-ups without a banking license.
Switzerland has rapidly established itself as one of the world's leading blockchain hubs, attracting both start-ups and hundreds of millions of dollars in investments. Technology, which was born as a means of replacing the existing financial infrastructure, is now being adopted and adapted by banks, exchanges and other industries.
Blockchain / DLT
Blockchain is an example of DLS technology (distributed ledger technology), a recent digital innovation that allows people to take direct control of their resources and exchange them peer-to-peer without the need for centralized third parties, such as banks or other entities .
Ownership and resource transactions are recorded on encoded digital books that are open to all participants for both viewing and validation. The complete history of asset ownership is included in these logs. To protect privacy, participants are assigned "private keys" – a series of randomly generated letters and numbers that act as IDs.
Blockchain was originally designed to be totally decentralized and open to the general public. But this is not suitable for many companies that opt for limited DLT platforms that require special access permissions.
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The relationship of the Swiss governmentExternal Link Published Friday describes innovation as "among the significant and potentially promising developments in digitization." These developments are expected to have considerable potential for innovation and greater efficiency, both in the financial sector and in other sectors of the economy ".
Digital goods
It also recognizes that the true potential of the blockchain – a form of distributed ledger technology (DLT) – "can not yet be assessed definitively" because it still needs to be tested on an industrial scale. Another warning in the report talks about the risk of cryptocurrencies being used for criminal purposes, including terrorist financing. The government said it will remain vigilant, but is awaiting the establishment of international guidelines before deciding whether further action is needed.
While current Swiss regulations cover many forms of digitalisation, such as e-banking, some aspects of blockchain / DLT technology are among the cracks in the legal code. There are two major challenges for incorporating the blockchain into the law.
New forms of encrypted digital tokens are not supported by physical resources, such as government-issued money or paper certificates. The law must be modified to recognize digital only resources, the report suggests.
Secondly, the blockchain is designed to circumvent intermediaries who register transactions and play a recognized role in protecting consumers from fraud. They are replaced in blockchain by decentralized digital registers and intelligent contract code that automatically processes the transactions. The government wants financial transactions carried out without physical intermediaries to have a place in the legal code.
Positive reaction
The report also proposes to give the discretion of the financial regulator the application of a lighter touch to the decentralized blockchain / DLT trading platforms, provided that their activities can not harm investors. The Swiss Financial Market Supervisory Authority (FINMA) currently has these powers in assessing fintech start-ups that offer limited banking services.
The creation of these discretionary powers eludes the recent Swiss legislation that has been implemented to align the Swiss financial center with the European Union, says Luzius Meisser of the Bitcoin Switzerland Association. The law has created three categories of stock exchanges, none of which is suited for decentralized token platforms, "making it necessary to create a new type to allow for the existence of such exchanges in Switzerland," says Meisser.
"This shows once again how the traditional Swiss approach of having laws based on the principles that give much discretion to citizens and regulatory agencies is much more conducive to innovation than excessively detailed European-style laws", he stated in a written statement.
Blockchain financial start-ups will soon be able to take advantage of the new Fintech regulations that allow companies to withdraw up to 100 million francs in customer deposits without the need for a bank license. Fintechs qualifying under this new regulatory category could also take customers' cryptographic tokens up to this value.
Unlike neighboring Liechtenstein, which is creating a new set of laws specifically aimed at blockchain, Switzerland has chosen the way to adapt the current legislation to incorporate the new technology. This approach was welcomed by the Crypto Valley Association (CVA), which sees a solid legal base as an essential pillar of the Swiss blockchain strategy.
"We believe 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," Mattia Rattaggi, spokesperson for the CVA, said in a note sent via e-mail to swissinfo.ch regulatory issues. "Fundamentally, this approach ensures maximum consistency within the current legal framework, while keeping it based on principles and flexible, while allowing for changes to be made on a" need for regulatory "basis."
The question of how to tax digital tokens has been postponed until a review has been completed at some stage in the next year. The Federal Ministry of Communications has also been instructed next year to determine how the blockchain can be reconciled with data protection laws.
Proposed changes to the law
Change bankruptcy laws to recognize data as a resource. This would allow the courts to manage purely digital assets and make sure they go to the right creditor when it comes to truncating insolvent businesses.
Modify the Banking Act following the same lines as above in the event of bankruptcy of a financial institution.
Change the scope of the Money Laundering Act to cover decentralized trade with the power to dispose of third party assets.
Create a "new authorization category" for traders and exchanges of blockchain securities to give FINMA the discretion to apply a lighter touch when assessing the assets of those entities. Change the law on financial market infrastructures and the law on financial institutions to "create more flexibility" for blockchain / DLT applications.
The Ministry of Finance is already examining an amendment to the Collective Investment Act to include a new category of funds (limited investment funds limited to L-QIF) so that "new innovative products can be brought to market more quickly and efficiently. terms of costs in the future ".
No immediate change in the financial laws for the insurance sector is immediately foreseen as blockhain / DLT in its "infancy" in this sector.
The report sees no reason to change any legislation regarding cryptocurrencies.
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swissinfo.ch
