Recently, Switzerland adopted a new DLT Regulations which sets the country as a leader in FinTech, Blockchain, DLT Technologies and other related programs. The new regulations will enter into force starting from this year.
The DLT amendments will mainly focus on security token exchanges. That means there would be a new license types for trading venues. These would be focused on digital assets; new custody service providers, clearer regulatory regime for digital asset custody providers; and edited asset token, enabling the creation and transaction of digital uncertified securities in a DLT ecosystem without legal hindrances.
A new DLT will amend such legal areas and bring in new solutions to the Civil Law, Insolvency law, Financial market law and most importantly Anti-Money laundering regulation and International private law. All these new amendments will bring a more legal consciousness to the area of blockchain applications.
Below you will find detailed information regarding how these new changes are being implemented:
- The first central element of the new regulation is a new licence category for “DLT Trading Facilities” which is called (DLT-Handelssysteme) introduced in the Financial market infrastructure law (FMIA). This new licence type has been defined as a professionally operated venue for the multilateral and non-discretionary trading of Digital (DLT) Securities. Its goal is to offer service in trading, clearing, settlement and custody with DLT based assets not only for regulated financial market players, but regulating even private customers.
- The new regulation allows the segregation of the digital assets for the benefit of the relevant creditors or investors, provided certain requirements are met. If the digital assets are held by the custodian in a way that unambiguously allows the identification of the owner on-chain or off-chain (through a sufficient internal ledger), the property to the digital assets remains with the client. In such case, banking regulations are not triggered, even if the digital assets of various clients will be pooled within the custody solution of the custodian.
- Under the existing legal framework, the Civil law treatment of “security token” has created uncertainty. To solve this, the new law introduces a new type of digital securities, the so called “Uncertificated Register Securities” (Registerwertrechte). Alongside, new rules for corporations looking to issue shares in a tokenized form are being released. The goal of the legislator is to allow for a stable and legally robust tokenization of rights, through the electronic registration of rights, that entails the same protection and functionality as a security. The creation itself is made by the parties, through a registration agreement according to which the relevant right is entered into a “Register of Uncertificated Securities” and may exclusively be asserted based on and transferred via the register.
As a result, this new legal amendments will allow more secure exchange of shares and other securities, trading facility, a better banking regulation, release of assets and access to data in bankruptcy procedures.
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