On 1 February 2021, the parts of the Swiss DLT-act that introduce ledger-based securities (register uncertificated securities) to Swiss law have entered into force. The remaining provisions of the DLT-act will enter into force on 1 August 2021.
Background
In September 2020, Swiss Parliament adopted the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (DLT-act).
Technically, the Swiss DLT-act is drawn up as a blanket act punctually adapting various other federal laws such that Switzerland can continue to develop as a leading, innovative and sustainable location in the blockchain and DLT area.
The Swiss DLT-act will now enter into force in two stages.
Civil Law Changes
On 1 February 2021, the parts of the Swiss DLT-act that amend the Swiss Code of Obligations, the Federal Intermediated Securities Act and the Federal Act on International Private Law have entered into force. These provisions enable the introduction of ledger-based securities that are represented on the blockchain.
Register uncertificated securities (Registerwertrechte; cf. new Art. 973d-973i of the Swiss Code of Obligations) are created when entered in an electronic register that meets certain requirements regarding functional safety and integrity, as well as transparency of information for parties involved. Entries in the electronic register have the same functionality and entail the same protection as negotiable securities.
These civil law changes in particular further increase legal certainty regarding the transfer and holding of digital assets from a Swiss law perspective and, thus, foster the general adoption of the technology as a new way of issuing financial instruments.
Remaining Provisions of the DLT-law
The remaining provisions of the DLT-act will probably enter into force on 1 August 2021.
They will in particular introduce a new financial market infrastructure authorisation typ, the so-called DLT trading facility (DLT-Handelssystem). The DLT trading facility will allow the multilateral trading of DLT securities also by unregulated end-users and its introduction will mark a further milestone in creating a sustainable and functioning infrastructure for digital assets in Swizerland.
The DLT-act will further introduce clarifications to Swiss insolvency and banking law, setting out the requirements for crypto-based assets to be segregated from the bankrupt's estate in the event of bankruptcy. In such a scenario, segregation will in particular take place, whenever the crypto-based assets can be individually allocated to a client. Under the new law, off-chain segregation will be deemed sufficient, thus, allowing the on-chain pooling of crypto-based assets, which can be seen as a further milestone for the industry.
Outlook and support
With its new DLT-act, Switzerland remains at the forefront of legal and regulatory developments in the area of digital assets.
We are glad to assist you with all legal and regulatory aspects of the new act.
