Swiss look to dominate Digital Assets in 2020

The Swiss Federal Council has announced a series of proposals which, if passed into law in Switzerland, would make this jurisdiction an extremely attractive location for organisations to issue and trade digital assets. These amendments to Swiss law aim to restrict any possible nefarious activities around digital assets and help to promote wider adoption of Blockchain technology.

Blockchain-powered solutions are increasingly being seen to be able to improve the efficiencies in the capital markets, whether that be on-boarding clients, strengthening oversight of compliance risk and control systems. There are also many opportunities to use Blockchain technology and create digital assets, backed by real assets, in a non-paper-based format, cutting the cost of issuing debt while enabling access to assets for smaller investors to Real Estate, Venture Capital, Private Equity, Infrastructure funds, Intellectual Property etc. Such assets can potentially be traded 24/7, 365 days a year on a global basis which, in itself, will prove to be challenging for regulators and possibly call for even greater collaboration and/or a lifting of some of the current restrictions.

 

Interestingly, we have seen the Securities Exchange Commission (SEC) in the USA recently announce proposed changes to alter the definition of  ‘accredited investors’ i.e. individuals with more than $1 million of net worth (or earning more than $200,000 p.a.), an organisation with more than $5 million in assets or organisations matching certain other restricted terms. Currently, if you have sufficient assets, it allows these accredited investors the opportunity to a greater number of private investments and what are often referred to as ‘riskier assets’ such as hedge funds, according to Bloomberg.

The SEC proposes that there also ought to be a criteria for accredited investors using a knowledge-based test, thus determining whether an individual could become an accredited investor or not and so be able to buy and sell more volatile investments.

SEC Chairman, Jay Clayton, said, “The existing definition only provides “a binary approach to who does or does not qualify for the status. Modernization of this approach is long overdue. The proposal would add additional means for individuals to qualify to participate in our private capital markets based on established, clear measures of financial sophistication.”

 

The new proposals from the Swiss Federal Council will encompass:

• The digitisation (some call the tokenisation) of rights and responsibilities which will create “Uncertificated Register Securities” and specific rules in the Swiss Code for corporations looking to issue shares in a tokenised form.
• Blockchain-powered exchanges – introducing a new type of licensed financial market infrastructure providers, Blockchain Trading Venues, offering trading, clearing, settlement and custody of Blockchain-based assets
• Segregation of Digital Assets in Insolvency – allowing for the segregation of Digital Assets for the benefit of the relevant creditors or investors, provided certain requirements are met

 

 

The Swiss Blockchain Federation has published guidelines for issuers of Digital Assets whether they be backed by equity or debt, saying, “the medium run could enable the development of a secondary markets for all shares that are currently not publicly traded.” A document laying out these guidelines is available from this link.

We have seen recent clarification from the High Chancellor recommending English and Welsh law is amended to give legal backing to Digital Assets and Smart Contracts. In Germany, banks will be allowed to offer the sale and storage of Cryptocurrencies. Furthermore, there is the prospect that in Singapore, Cryptocurrency-based derivatives will be listed on the regulated exchange. It is the Swiss however, who are currently proposing the most far reaching changes, thus positioning themselves as the most open and accommodative jurisdiction for Digital Assets.

For more #DigitalBytes every week email:info@Teamblockchain.com

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