The Federal Council of Switzerland will make use of the report submitted by the Blockchain working group which was put in place earlier this year. The head of state and government of Switzerland will also make use of the recommendations made by the working group.
Minimal regulation required for the crypto sector
The report looked into cryptocurrencies and blockchain and recommended that the regulation required for this sector should be minimal. The working group in their report noted that the current legal framework in the country is enough to handle emerging technologies such as Blockchain, with only a few minor changes to be made.
The Federal Council is of the view that at the moment, there is no need to massively alter the financial market law to accommodate blockchain-based applications. They pointed out that the financial market law in the country is technology-neutral and as such, will be able to handle new technologies.
Some specific areas need minor adjustment
Even though the fundamental aspects of the market law requires no changes, some specific areas would need slight adjustments with areas such as banking law, civil law, insolvency law, and anti-money laundering law. Regarding the civil law, the Federal Council is of the view that there should be an increase in the legal certainty surrounding the transfer of rights using digital registers.
Talking about the financial market infrastructure law, the council recommends a new and flexible authorization that will solely service the blockchain-based financial market infrastructures. The Federal Council listed the reasons for this recommendation including the challenges that business models based on blockchain would face.
The report stated that “…such challenges exist namely in the areas of trading tokens via central trading platforms and in the application of financial market law to decentralized financial market “infrastructures” Hence, it seems more expedient to address the challenges in financial market infrastructure law that are specific to blockchain/DLT applications by means of specific amendments (instead of a regulatory carve-out).”
Changes to be made in Insolvency Law
The Federal Council in its report recommended an adjustment in the insolvency law. The council is asking for more clarity in the separation of cryptocurrencies and other digital assets during bankruptcy. The council stated that they consider it necessary to make provisions for unambiguous rules regarding the segregation of crypto-based assets from the other assets of the bankrupt individual.
The council pointed out that at the moment, there is no clarity especially in cases where crypto-based assets are stored with third parties and whether in such a situation, a debtor has the right to do away with such assets if the third party has asserted their rights.
The Federal Council also proposed changes in some areas such as the anti-money laundering law where they suggested that the decentralized platforms should be subject to the AML Act of the country.
With this report, the Federal Council noted that it is looking to “‘create the best possible framework conditions so that Switzerland can establish itself and evolve as a leading, innovative and sustainable location for fintech and blockchain companies”.