Recommendations to Regulate Switzerland’s Blockchain Industryby Company Announcement April 28, 2018
Federal Councilor Johann N. Schneider-Ammann was presented with a document containing a host of recommendations for the development of the Swiss blockchain industry at the Blockchain Summit in the Swiss city of Zug.
The paper (in German here) was compiled by the Blockchain Taskforce, an industry-led group intended to complement the work of the governing Swiss Federal Council’s Blockchain/ICO Working Group.
At the core of the White Paper is the matter of Initial Coin Offerings (ICOs) and the tokens issued by Blockchain companies. A second important topic is a difficulty experienced by the blockchain industry in accessing Switzerland’s financial market infrastructure.
At present, companies in Crypto Valley have to switch to foreign banks to open business accounts.
The broad-based Taskforce concluded that many of the issues surrounding the new business models can be resolved without fundamental changes to the law. Yet for companies, legal uncertainty continues to surround the status quo because no judicial precedent exists.
A change to the Code of Obligations – the part of Swiss civil law governing contract law and corporations – although not mandatory, is recommended as politically desirable. The legal processes surrounding the trade in tokens should be clarified.
The White Paper presents various options for the future, such as exempting digital transmissions from legal requirements governing written transactions. However, this would require the establishment of a decentralised trade register. In a position paper published at the Blockchain Summit, the ICO/Token Working Group under Prof Dr Mirjam Eggen of the University of Bern provided further analysis and recommendations on the issue.
Call for Swiss Blockchain Sandbox
The Taskforce decided against recommending an adjustment to existing money laundering legislation, on the grounds that existing rules were adequate if applied consistently to the new financial technology. The group also warned against a straight transposition of existing regulatory supervision to the blockchain industry.
The Taskforce also advocated the establishment of a so-called “sandbox”; an experimental legislative space where more flexible rules can be applied, modelled on those already created by the Swiss Financial Market Supervisory Authority FINMA for other start-up sectors. Existing money laundering rules and the obligation to issue a financial prospectus would still apply in the sandbox.
It is essential for the viability of the Blockchain Group, and of the business hub more widely that young companies are able to open a Swiss bank account. A working group headed by the Swiss Bankers Association will draw up a specific list of requirements for blockchain companies, which will also specify how information must be obtained to identify investors and clients if it relates to financial market services. The criteria and processes must be in line with the agreement on the code of conduct for the due diligence of banks.
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