The Swiss Distributed Ledger Technology (DLT) Act that created a Swiss Legal Framework for Asset Tokenization, took effect on February 1, 2021, significantly advancing the tokenization of assets. Designed to be technology-neutral, the Act does not specifically mandate the use of blockchain, although it was enacted to meet the distinct needs of this technology. The major innovation introduced by the DLT Act is the ledger-based security, recognized as an uncertificated security represented by an entry in an electronic register.
The ledger-based security must satisfy three key legal requirements:
Power of Disposition: The holder must have full control and the ability to dispose of the security, akin to physical chattels. Integrity: The ledger must accurately reflect the legal situation and be protected against unauthorized modifications.
Transparency: The ledger should transparently document the right, its holder, and the registration agreement, allowing parties to verify relevant entries independently.
Rights and Tokenization: In Swiss law, company law may permit the tokenization of certain rights, such as contractual rights, into ledger-based securities. Personal property rights (movable property or chattel rights in common law) cannot undergo tokenization, except in specific cases like mortgage certificates or commodity papers.
Definition: Tokenization is the process of converting the rights or ownership of real-world assets into digital tokens on a blockchain or a distributed ledger. This transformation allows assets to be managed and transacted digitally.
A wide array of assets is eligible for tokenization, including:
Financial Assets: Shares, bonds, commodities, and structured products.
Real Estate: Commercial, residential properties, land, and real estate development projects.
Collectibles & Art: Items like fine art, rare books, vintage cars, and luxury goods.
Infrastructure: Energy facilities, transportation systems, and communication infrastructure.
Data: Personal, financial, and energy data.
Entertainment & Gaming: Intellectual property, esports platforms, and digital art.
Tokenization offers numerous advantages across various sectors:
Security and Fraud Prevention: It enhances data security by replacing sensitive information with tokens.
Accessibility and Liquidity: Tokenization opens up investment opportunities to a broader audience by enabling fractional ownership and improving market liquidity.
Efficiency and Speed: By removing intermediaries, tokenization reduces transaction times and costs.
Transparency ensures the recording of every transaction in a clear manner, reducing fraud and enhancing trust.
Switzerland excels as a hub for tokenization, celebrated for its strong investor protection laws and advantageous business environment. The country’s stability, political neutrality, and established financial institutions boost its attractiveness to global investors. Moreover, Switzerland actively adopts blockchain technology, creating a secure and predictable legal framework that fosters innovation in this field.
Our Swiss team comprises a diverse group of professionals. It includes experienced lawyers, bankers, and bank auditors, who can deliver expert global tokenization services. Please feel free to contact us for more details about our support services in tokenization at connect@swissfintechpro.com
