Switzerland’s Trailblazing Approach to Distributed Ledger Technology

In 2020, Switzerland made significant strides in the realm of Distributed Ledger Technology (DLT) with the passage of the DLT Act. This legislative milestone marked a pivotal moment for innovation, particularly in leveraging ledger-based technologies to transform various sectors. Unlike its counterpart Liechtenstein, Switzerland’s DLT Act is not a standalone law; rather, it serves as a comprehensive framework modifying existing civil, financial market infrastructure, banking, and bankruptcy regulations to accommodate the burgeoning DLT landscape.

A cornerstone of the DLT Act is its formal recognition of uncertificated registered securities, also known as digital securities. These digital assets can now be transferred without the need for traditional financial intermediaries, offering newfound legal clarity regarding ownership and transfer mechanisms. Under this legislation, holders of digital securities are entitled to interest payments and possess the ability to assert debt claims against third parties.

Prior to the enactment of this law, automated DLT applications faced legal ambiguity, as the absence of a hand or digital signature rendered certain claims and contracts invalid. However, the DLT Act effectively removes this barrier by facilitating the issuance and transferability of uncertificated registered securities within token registers and DLT systems, without the requirement of a signature. This pivotal legal provision not only legitimizes the transfer of ownership but also positions Switzerland as a frontrunner in DLT innovation.

Moreover, Switzerland’s DLT Act empowers companies to issue both traditional and uncertificated registered securities, embracing blockchain technology as a valid medium for maintaining shareholder registers. Nevertheless, companies must maintain a comprehensive overview of securities across various shareholder registers and, upon obtaining consent from shareholders, amend their articles of association to incorporate uncertified registered securities.

Switzerland’s proactive approach to regulating DLT reflects its commitment to fostering technological innovation while ensuring regulatory clarity and legal certainty. By embracing the transformative potential of DLT, Switzerland is poised to further solidify its position as a global leader in blockchain and cryptocurrency innovation, attracting investment and fostering an ecosystem conducive to technological advancement.