Switzerland now allows trading in token securities in a blockchain with the same legal status as traditional assets. The new law came into force on Monday.
The Swiss legislature decided not to create a completely new regime, but to adapt the legislation in order to transfer certain features of Distributed Ledger Technology (DLT) to the existing legal framework. With the DLT changes, token securities will be recognized as a new class of assets whose legal property rights will be automatically transferred to each new investor via the blockchain.
“You used to have non-certified rights there that had to be assigned, and a lot of smart people thought about how this could be done in the chain,” said Alexander Vogel, partner at the Swiss law firm Meyerlustenberger Lachenal (MLL). “With these newly registered rights, it is clear that you have legal certainty. If they are properly transferred onto a blockchain, the new owner who keeps them in their wallet will definitely be the owner of those rights. “
The change in the law continues to cement Switzerland as one of the most advanced jurisdictions in the world for crypto (only Singapore is on a similar level). In other words, it will not be an all-rounder: Obtaining the required license from the Swiss supervisory authorities takes time and effort.
In the meantime, SEBA is issuing its Series B shares as Ethereum ERC-20 tokens. The move will “enable seamless connectivity for trading and liquidity at future internationally recognized digital liquidity locations,” the company said in a press release.
Matthew Alexander, Head of Digital Corporate Finance and Asset Tokenization at SEBA Bank, spoke about the new legal wrapper for tokenized assets:
“It’s a real blockchain-based digital twin of a traditional security. Switzerland’s strategy is to build a bridge into this new digital economy and the transition from traditional fiat banking and security guarantee methods. “
Alexander said any issuer in Switzerland could use the new laws. These include, for example, the Swiss banking group UBS, which issues its primary securities on SIX, the country’s national stock exchange.
Presumably, the DLT Act will fuel the fire under the SIX Digital Exchange, SDX, to get its services up and running and ready to serve this emerging market.
“SDX, the digital twin of the Swiss stock exchange, is still under construction and has been for a long time,” said Alexander from SEBA. “But then it will house these digital twins and the whole transition will come.”
Still, SDX could be missing out on a trick if it doesn’t put its skates on. Both Sygnum and SEBA are linked to Singapore and will act as market makers on DBS Bank’s new digital exchange, which is now operational.
Vogel from MLL agreed that Switzerland’s new legal basis for DLT would also look attractive in Singapore.
“There will definitely be more legal certainty,” said Vogel. “Even if traded in a foreign jurisdiction, you would still consider the underlying right of investors to have the confidence to invest in that asset.”