With this report, the Federal Council aims to provide an overview of the relevant legal framework and to clarify the need for action. The report should show
- that the Swiss legal framework is already suitable for dealing with business models based on DLT and blockchain,
- that Switzerland wants to further improve the innovation-friendly framework conditions and
- that the Swiss authorities are determined to rigorously combat abuses.
- Civil law imposes no requirements – and accordingly no obstacles – for the transfer of cryptocurrencies. Consequently, there is no need to adapt civil law with regard to the transfer of cryptocurrencies.
- Tokens that represent a legal position (claim, membership, right in rem) should fulfil a function similar to the function presently and traditionally fulfilled by securities. Since an entry in a decentralised register accessible to interested parties can create publicity similar to the ownership of a security, it seems justified to attach similar legal effects to this entry. The Federal Council is proposing an amendment to securities law to increase legal certainty. The proven principles of securities law should be retained as much as possible. Digital representation and transfer is therefore possible only for those rights which could also be represented by a security and which are freely transferable. The planned legislative amendment should enable the legally secure transfer of uncertificated securities by means of entries in decentralised registers and be designed as technology-neutral as possible.
- The Federal Council considers it necessary to provide for unambiguous rules regarding the segregation of crypto-based assets from the bankrupt’s estate. Such a right would require in any case that these assets could be unambiguously allocated to the third party. Additionally, the Federal Council considers it necessary to examine whether a right to segregation should be created with regard to data without financial value. As part of the planned consultation, the Federal Council will thus propose a legislative amendment that addresses these issues.
Financial market law
- In banking law, the Federal Council – in the light of the aforementioned proposed amendment to the Debt Enforcement and Bankruptcy Act – will examine a corresponding adjustment of bank insolvency law provisions (particularly in the area of the segregation of custody assets) and submit any adjustment proposals in the planned consultation.
- In financial market infrastructure law, the Federal Council is proposing the creation of a new authorisation category for infrastructure providers in the blockchain/DLT area. Furthermore, related amendments to the Financial Market Infrastructure Act and the new Financial Institutions Act are to be proposed with the aim of creating more flexibility.
- The Federal Council currently sees no need to amend the Financial Services Act (that will enter into force at the start of 2020) due to blockchain/DLT. The designated requirements, for example for informing customers, are particularly relevant for financial instruments based on blockchain/DLT, as such financial instruments are innovative and sometimes difficult to value, and they can experience very sharp fluctuations in value.
- In terms of collective investment schemes law, the Federal Council instructed the FDF in September 2018 to prepare a consultation on amending the Collective Investment Schemes Act by mid-2019 in order to allow for a new category of funds (so-called limited qualified investment funds, L-QIFs). As a result, new innovative products could be placed on the market more quickly and cost-effectively in the future.
- In the insurance sector, many blockchain/DLT projects are currently in their infancy. So far, no need for action in terms of financial market law has become evident, but a conclusive assessment is not yet possible.
Anti-money laundering law
- The Anti-Money Laundering Act is currently sufficiently technology-neutral to also cover activities related to cryptocurrencies and initial coin offerings (ICOs) to a large extent. The general principles of the Anti-Money Laundering Act also apply to cryptobased assets. The activities of most players in the crypto sector already qualify as financial intermediation and are therefore subject to the Anti-Money Laundering Act.
- So-called non-custodian wallet providers and certain decentralised trading platforms for cryptobased assets are not subject to the Anti-Money Laundering Act at the moment. The challenges arising in this connection generally have to be addressed internationally within the context of the work of the Financial Action Task Force. Against this backdrop, the Federal Council is currently refraining from proposing that non-custodian wallet providers be subject to the AntiMoney Laundering Act.
- In contrast, in order to increase clarity for market participants, the current subjection of decentralised trading platforms to the Anti-Money Laundering Act should be anchored more explicitly in law and the possible subjection of other such platforms should be examined in the light of international developments.