Are the world's leading economies embracing blockchain

This article was taken from Digital Bytes, a weekly analysis of developments in the blockchain and digital assets sectors, taking real examples of how, why and where blockchain technology is being implemented around the world. For more information, please email: WBEF@rics.org

Recently proposed 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 improve efficiencies in the capital markets, whether that be on-boarding clients, or 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 and intellectual property. Such assets can potentially be traded 24/7, 365 days-a-year, on a global basis. This in itself will prove to be challenging for regulators and possibly require greater collaboration and/or a lifting of some existing restrictions.

Interestingly, the Securities Exchange Commission (SEC) in the USA recently proposed changes to the definition of what, or who, constitutes an ‘accredited investor’. Currently, with sufficient assets, the opportunity exists to pursue a greater number of private investments and what are often referred to as ‘riskier assets’ (such as hedge funds), according to Bloomberg.

The SEC believes that there ought to be an additional criterion for accredited investors based on a knowledge test, which would determine whether an individual is sufficiently well informed to become an accredited investor, 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 (or 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 provider (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 market for all shares that are currently not publicly traded."

The move could be said to form part of a larger shift taking place across some of the world’s most developed economies. Recently in the UK, the High Chancellor recommended English and Welsh law 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.

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