Swiss Blockchain and Cryptocurrency regulation
A big announcement came on 14th Dec. from SIF (The Swiss State Secretariat for International Finance) regarding the Financial Council’s decision on the Legal Framework for the blockchain and Distributed Ledger Technology in the nation. Upon realising the implication of this technology in the international context, they embraced the idea to exploit its benefits. So they agreed upon creating the regulatory framework conditions that can bring sustainable development while also giving a word of caution about the scams and crimes.
According to the Wall Street Journal, Switzerland wants to become the world capital of Cryptocurrency. Interesting thing is that most of the ICOs are done in the Swiss servers which in turn make the country a multi-millionaire hub. Zug, a beautiful town (better to say crypto-paradise) is already a home for 400 blockchain based companies. Furthermore, 4 out of the 10 biggest ICOs in 2017 were in Switzerland, more than any other country.
The council has set industry-specific regulations catered to blockchain businesses that include:
- Banking law
- Civil law
- Financial market law
- Insolvency law
- Anti-money laundering law
As compared to its European counterparts, Switzerland is fortunate to have a principal based approach in terms of embracing new technologies. Therefore the Swiss authorities made some measurable amendments in the Banking sector in order to allow technologies to flourish. Its worthy inclusion that a country getting strict over new technologies reduces the scope of development.
There is an economic system theory about free market capitalism called Laissez- Faire (originated in 17th century). It states the rights of the market, the people or society with the limited government intervention and healthy collaboration towards economic change.
Important topics covered in the current report on cryptocurrency regulation:
- Fundamentals and applications of DLTs and Blockchain technology.
- Comparison of the uses cases of this technology in other countries.
- The legal classification of digital assets and operations under the civil law of the nation.
- Managing the digital assets in case of debts during bankruptcy, issues with partnership or divorce proceedings etc.
- How current financial market laws including Federal Financial Services Act (FinSA) and Financial Institutions Act (FinIA) observes Blockchain and DLTs.
- Considerations over cryptocurrency regulation that can govern the operations of the technology effectively.
- How the regulations can effectively foster the country’s reputation while drawing up cyber crimes, terrorism support and other malicious activities.
So we learn three most important principles:
- Swiss technical authorities are open for new technologies and position itself as a point of attraction for Blockchain and Fintech companies.
- The regulation is meant to provide adjustments in the decentralised entities that are similar to the centralized structures.
- While welcoming fresh innovations, policymakers need to observe the potential and provide optimal regulations to avoid any vulnerabilities.
The idea is just to set up organized frameworks rather foreseeing the implications. However, a few things are put in check in order to avoid vulnerabilities or cyber attacks. Additionally, the council addressed the awareness of money laundering, involvement of terrorist financing and corrupt business dealings. Consequently, they will monitor each financial transactions and implement compulsory KYC and AML (Anti-money laundering) guidelines in all exchanges and businesses.
On a funny note, what would you expect to hear from Roger Federer upon asking the best thing about the regulation? “Well, the flag is a big plus”.
But we must keep in mind that Blockchain and cryptography technology is as vast as the Universe and is still in its nascent stage. Eventually, there could be some ways of facilitating illegal activities considering technology’s unpredictability and anonymous nature.