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28 April 2017
In February 2017 the Federal Council initiated a consultation procedure on new financial technology (fintech) regulations. The revised provisions ensure that barriers to market entry for fintech firms are reduced and that Switzerland's competitiveness as a financial centre is maintained. The consultation will end on May 8 2017. The proposed amendments to the Banking Act and the Banking Ordinance aim to ease the regulatory framework for innovative fintech companies and will support and enable innovation, while simultaneously taking into account the potential risk involved with their business model for customers and the financial system as a whole.
The proposed easing of the regulatory framework will contain the following main elements:
The introduction of a new licensing category for financial innovators and a licence-exempt area (sandbox) was strongly supported by FINMA, since a more flexible fintech regime is expected to significantly boost competition among the financial players and through this increased competitiveness to contribute to the quality of the financial services offered in Switzerland. Against this backdrop, the Federal Council announced its intentions for easing the regulatory framework for providers of innovative financial technologies in November 2016, with the aim to reduce barriers to market entry for new providers in the fintech area and to increase legal certainty for the sector overall.
However, in its several proposals to amend the licencing regime, the Federal Council shied away from formulating rules that are aimed at regulating other issues relating to rapidly progressing digitisation in the financial sector (particularly in the blockchain context), such as decentralised autonomous organisations (DAOs). DAOs are platforms for the autonomous governance of investment capital featuring smart contract (scripting) functionality (ie, executing scripts using an international network of public nodes, even though DAOs with a strong Swiss connection have already been set up and are operating – eg, the DAO Ethereum set up by the Swiss non-profit foundation Ethereum Foundation). However, the Federal Council announced that it will follow these developments closely in the future and swiftly proposed necessary regulatory adjustments if required.
Following the consultation period, the Federal Council will review the feedback voiced in the consultation and prepare the final amendments. The light banking licence regime will require further amendments to the rules and regulations promulgated under the Banking Act (as well as the Liquidity Ordinance and the Capital Adequacy Ordinance) and thus the new regime is not expected to enter into force before 2018.
For further information on this topic please contact Alexander Vogel, Christophe Pétermann or Reto Luthiger at Meyerlustenberger Lachenal by telephone (+41 44 396 91 91) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Meyerlustenberger Lachenal website can be accessed at www.mll-legal.com.
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