Switzerland Relaxes Laws for Blockchain and Crypto Startups

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Switzerland has revealed a new legislative approach to Blockchain regulation. In an official report, the Swiss government acknowledges that Blockchain tech is one of the most significant latest developments in the financial industry, which can help boost the country’s economy.

The document indicates that the Swiss Federal Council’s primary aim is “ensuring the integrity and reputation of Switzerland as a financial center” and for Switzerland to be able to “exploit the opportunities offered by digitalization.”

The government wants to develop the “best legal framework conditions” to give the country the opportunity to evolve as a top and sustainable center for fintech, Blockchain, and innovative companies for a variety of fields.

While the report also tackles the risk that digital currencies can be exploited for illicit activities like terror financing, the country maintains a positive stance towards the technology. The document states that the country’s law needs to be amended, making it acknowledge “encrypted digital tokens” that are not pegged to any physical assets. The federal council also clarified that it intends to introduce decentralized financial transactions in the legal code.

The report also discusses a recommendation that will grant discretionary powers to the Swiss Financial Market Supervisory Authority (FINMA) to relax regulations on decentralized securities trading platforms so long as their operation does not hurt investors. The regulatory approach actually tries to avoid existing laws in order to be aligned with the EU’s stance on the matter.

In a written statement, Luzius Meisser, a Swiss economist, believes that this legislative approach is expected to be more effective, saying:

“This shows once again how the traditional Swiss approach of having principle-based laws that give a lot of discretion to citizens and regulatory agencies are much more innovation-friendly than overly detailed European-style laws.”

Switzerland is trying to obtain these objectives without the need to create a set of new laws, instead choosing to adjust existing legislation to include new technological advancements. In announcements, Crypto Valley Association (CVA) spokesman for regulatory matters Mattia Rattaggi remarks on the organization’s position, saying:

“We feel 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 … Crucially, this approach ensures maximum consistency within the current legal framework while keeping it principle-based and flexible, while allowing changes to be adopted on a ‘need-to-regulate’ basis.”

The report also summarizes a number of adjustments to the country’s laws. However, the report makes it clear that there are no efforts to immediately change financial or insurance industry-related laws, taking into consideration the fact that Blockchain tech is still “in its infancy” with regards to these sectors. So far, the most significant legislative modifications involve:

  • Amending the Collective Investment Schemes Act to include a new type of “limited qualified investment funds” with the intention of placing future innovative products on the market in a more time and cost-effective way.
  • Start recognizing data as an asset by changing company bankruptcy laws. This would allow Swiss courts to handle and properly distribute digital assets when solving legal disputes.
  • Widen the Anti-Money Laundering Act to include decentralized exchanges and allow law enforcement to dispose of third-party digital assets.
  • Creating new authorization categories to give FINMA discretion to loosen regulations for decentralized securities traders and exchanges based in Switzerland.
  • Amending the Financial Institutions Act and the Financial Market Infrastructure Law to make them more flexible towards blockchain initiatives.