Last Friday something magical happened in Switzerland. The Federal Council of Switzerland passed a report about the legal framework for blockchain technology.
The introduction to the report published on the website of FINMA (Swiss financial supervisory authority) states that the government wants to establish Switzerland as leading innovation and sustainability for blockchain and fintech companies.
In a nutshell, the report shows that fundamentally the current legal framework is flexible enough to accomodate innovative business models. The Council has also suggested precise adjustments for any lacking piece within the framework. These modifications are targeted at the enablement of new structures around digital and tokenized assets.
Whilst reading my way through the 170 pages of German, I was positively surprised about the extent and depth of the report. Within the summary, several key topics stood out to me, I share with you my thoughts on them below:
A new species and the taste of disintermediation
First and foremost, there is an announcement about the creation of a new license for exchanges, referred to as ‘new authorization category’ within Financial Market Infrastructure Law. Under this new exchange license a platform operator will be able to list and offer to trade any type of token (also security tokens), host retail and institutional players, and enable non-discretionary, multilateral trading. This is already a 100 light years forward from where we are today.
But this is not all. The most important aspect is that it is not a bank, nor a stock exchange, nor a custodian and neither is it a clearing house. It is all of them, in one! This is a revolutionary step into the future of financial services and disintermediation. Something that does not exist in the current institutional landscape today: a new species.
In the report this is referred to as ‘holistic approach’. Until now in most jurisdictions we have a sharp separation between exchanges, central custodian and clearing agents. With this new regulation, Switzerland becomes one of the first nations worldwide to recognize the power of DLT (Distributed Ledger Technology) and unleash the next massive wave of disintermediation in the financial services industry. The wave that will bring to extinction a lot of institutions that are so dominant and powerful in today’s financial system.