Switzerland officially ushers in new blockchain finance era

The launch of digital asset laws in Switzerland has been greeted with a welter of activity from the growing industry. Companies are positioning themselves to gain ‘first mover’ competitive advantage in the brave new world of distributed ledger technology (DLT) finance.

Switzerland passed the so-called ‘blockchain law’ in record time last year. It is being implemented in two phases: company law reforms on February 1 to be followed by financial market infrastructure upgrades from the beginning of August. This will open the doors to a fully regulated cryptocurrency and digital securities industry in Switzerland where all participants know where they stand and the risks are understood.

It is hoped that this will bring new benefits to the financial markets – faster trading, reduced costs and a wider range of products available to a greater number of participants.

Three companies (SEBA and Sygnum banks plus Crypto Finance) made announcements on February 1. Crypto Finance has been awarded a securities house license by the Swiss financial regulator FINMA for its Crypto Broker division. The brokerage, which handled over CHF1 billion in trades last year, can now enable clients to trade a new breed of digital securities, including company shares and potentially alternative assets such as tokenised real estate, luxury goods and collectibles.

Several other entities, including SIX Group’s Swiss Digital Exchange (SDX), Bitcoin Suisse, Lykke and Taurus are also seeking FINMA licenses (either announced license applications or heavily rumoured intentions).

SEBA and Sygnum banks, which were awarded FINMA licenses in 2019, have wasted little time in announcing their first digital assets. Sygnum has tokenised a range of premium wines from Fine Wine Capital on its Desygnate platform, which was launched last year. A range of other companies are poised to issue digital assets through the bank, including real estate and shares in an electric car manufacturer.

SEBA, which raised CHF20 million from investors at the end of last year, has converted the resulting participation certificates into digital shares that can be traded on blockchain exchanges.

There are now a wide range of companies in Switzerland that can create and list DLT-compatible digital securities. What’s lacking is a network of platforms on which to trade them. That piece of the jigsaw is expected to fall into place as the year progresses. SDX says it will launch in the second quarter of the year, while the second batch of legislative changes this summer will create a new license category for DLT exchanges.

“With the DLT law coming into force, Switzerland reaffirms itself as one of the most progressive and innovative legal and regulatory jurisdictions around the world that now fully supports the issuance of digital securities on a native blockchain basis,” said SEBA board member Hans Kuhn.

Switzerland may be one of the first countries to comprehensively codify digital assets into national law, but the race to build the new generation of innovative financial companies and infrastructures is still wide open.