The new legal framework in Switzerland gives impetus to the Blockchain

The State Secretariat for International Finance (SIF) has announced the adoption by the Federal Council of a recent reportLegal framework for Distributed Ledger Technology and blockchain in Switzerland-and expressed their intention to assist in the development of laws for new technologies, in particular distributed master book blockchain technology and innovation.

Switzerland: Blockchain Safe Haven?

In a press release of December 14, the Swiss State Secretariat published a report illustrating the forecasts for "significant and potentially promising developments … for innovation and enhanced security" while maintaining a tone cautious about the future of new technology regulation.

The report outlines the bases and potential uses of blockchain and DLT technology, inserts this insight into an international context, examines the applicable legal framework, in particular the financial market law and the classification of tokens as "assets", and discusses potential problems .

The report outlines the following principles:

• Policy makers should provide an optimal framework conducive to innovation.
• Switzerland should quickly make targeted adjustments … with regard to DLT / blockchain applications.
• Switzerland should continue to pursue a legislative and regulatory approach based on principles and neutral from technology.
• Switzerland should position itself as an attractive place [for] DLT company / blockchain.
• The Swiss authorities should position themselves as open to new technologies.

The report makes no claims about what the future holds. What is clear, however, is the Council's wish to "exploit" the potential benefits of the new technology and to inaugurate a welcoming environment for blockchain businesses in Switzerland:

"[The Federal Council] wants to create the best possible framework conditions so that Switzerland can establish itself and develop itself as a leading, innovative and sustainable position for the fintech and blockchain companies ".

The main objective, as stated in the report, is an advantage for the blockchain technology in difficulty, especially in terms of acceptance and universalization. Using a "bottom-to-bottom" approach, Switzerland can allow the market and technology to emerge "on the basis of principles", not on the whim of a frightened market or a misinformed government agency.

Among the different principles outlined in the report, the laissez-faire approach to leaving the decision-making process "to the market" stands out as an optimistic view of the recently sad regulatory landscape:

"Market and societal preferences should decide which technologies prevail, while policy should ensure optimal and favorable conditions for innovation".

Need for regulation

Alongside this rosy perspective, however, there is a need to update the financial regulatory "infrastructures" currently in force. The Council suggests "the creation of a new category of authorization for activities based on cryptography". The report does not reach the point of predicting the future; simply states the need for "adjustments" to the current financial regulatory framework:

"This paradigm shift (ie the transition from centralized structures to decentralized structures) also poses important challenges for the regulator[s]. The same objectives apply to decentralized structures as in centrally organized financial markets ".

Observation of the "Due Diligence"

In addition, the report mentions awareness of the potential threats of money launderers, as well as terrorists who use the new technology for nefarious purposes.

Addressing these issues, the report includes an in-depth examination of the Swiss Penal Code, but ultimately concludes that the monitoring operations, regardless of the classification of assets, are the responsibility of financial intermediaries to control the exchange of all activities intended for reports. corrupt or terrorist business related transactions:

"Financial intermediaries must comply with due diligence obligations to prevent money laundering and terrorist financing, as well as duties in case of suspected money laundering. [include] clarify the type and purpose of the business relationship ".

Swiss law complies with several AML (know-your-customer) and anti-money laundering (AML) guidelines that are common among financial hubs.

However, they still have room to improve as they are known for the "lack of adequate regulation of some potential means to facilitate money laundering". This is even more urgent considering the anonymous nature of cryptocurrencies.

However, Switzerland is ready to take on the challenge of blockchain technology. According to the Heritage Foundation's 2018 Economic Freedom Index, Switzerland ranked 4th (behind New Zealand, Singapore and Hong Kong), demonstrating its initiative in promoting economic development based on "rule of law" , size of government, regulatory efficiency and open markets ". "

This latest move guarantees Switzerland a promising place for companies and developers interested in pursuing blockchain development. Likewise, this can also defeat some of the principles of decentralization, a milestone of the ethos blockchain.

Along with its reputation for economic freedom, perhaps Switzerland will become a sanctuary for blockchain and cryptocurrency technology.