Main changes
Lowered threshold for AML duties
Comment


On 25 September 2020 Parliament passed a law to incorporate crypto assets and digital ledger technologies (DLT) into Swiss law (the DLT Bill), making the Swiss crypto regulatory framework one of the most advanced in the world.

Main changes

The Federal Council has scheduled the following main changes to enter into force on 1 February 2021:

  • In the Code of Obligations and the Private International Law Act, register value rights should be treated as a new form of security (in addition to uncertificated rights, certificated securities and book-entry securities) if they were created and transferred on an electronic register, such as DLT. In this case, further formal requirements – such as written assignments – no longer apply to transactions created on DLT.
  • In the Financial Services Act, the duty to join an ombudsman office will be abolished only for financial service providers with professional or institutional clients. The Swiss Financial Market Supervisory Authority (FINMA) has made a commitment not to enforce the ombudsman duty required by the existing law for such service providers prior to its abolishment on 1 February 2021.

The following main changes are expected to enter into force on 1 August 2021:

  • In the Federal Law on Debt Collection and Bankruptcy (DEBA), the segregation of crypto-based assets in the event of insolvency is to be expressly regulated insofar as it is no longer necessary on a technical level, but based only on records. Further, it will be possible for users to enforce the release of their data within the bankruptcy of a third person, such as private keys, seed data or passwords held by a crypto trading platform.
  • In view of the easement in the DEBA, the eased segregation requirements will require pooled wallet providers with off-balance sheet crypto assets to apply for a fintech licence according to the Banking Act (BA), even if the crypto assets' value exceeds the Sfr100 million limit. Pooled wallets with crypto assets will therefore be treated in the same way as other deposit accounts under the BA.
  • In the Financial Market Infrastructure Act, a new authorisation category for 'DLT trading facilities' will be introduced. This will function similarly to the existing multilateral trading facilities but will allow for direct access of retail participants and the provision of further services on the trading value chain, such as clearing, settlement and custody services.
  • In the Anti-money Laundering Act, the existing exemption for non-custody wallet providers will be limited to non-custody wallet providers which have no continuous business relationship with the user.

To implement these changes fully, the Federal Department of Finance has proposed corresponding amendments to several ordinances in a draft framework ordinance (the Draft DLT Ordinance).

Lowered threshold for AML duties

Separately from the DLT Bill, as of 1 January 2021 FINMA has lowered the threshold for AML duties relating to virtual currency transactions from Sfr5,000 to Sfr1,000, provided that such transactions do not qualify as money remittance (so-called 'three party transactions'), which is subject to even lower thresholds.

Comment

Once the DLT Bill enters into force on 1 February 2021 and 1 August 2021, Switzerland's already high-quality regulatory framework for crypto will become one of the most advanced in the world. The government's explicit approach is to create the best possible framework conditions so that Switzerland can establish itself and evolve as a leading, innovative and sustainable location for fintech and DLT companies.

For further information on this topic please contact Alexander Vogel or Reto Luthiger at Meyerlustenberger Lachenal by telephone (+41 44 396 91 91) or email ([email protected] or [email protected]). The Meyerlustenberger Lachenal website can be accessed at www.mll-legal.com.