Switzerland's Federal Council Sets Out to Improve Blockchain and DLT Framework Conditions
Switzerland's Federal Council adopted a formal report on the legal framework for blockchain and distributed ledger technology on 7 December 2018, setting a clear direction: the existing Swiss legal system is largely capable of handling DLT, but a handful of targeted adjustments are needed to remove friction and reduce legal risk. For accounting firms, auditors, and CFOs operating in or servicing Swiss digital asset businesses, this is not background noise. The proposed changes touch asset segregation in bankruptcy, AML obligations for decentralised platforms, and a new licensing category for blockchain-based market infrastructures, each of which has a direct bearing on how digital assets are classified, held, and reported.
Why the Federal Council Acted
The report originated from a blockchain and ICO working group established by the Federal Department of Finance in January 2018. That group consulted both the fintech and traditional financial sectors before delivering its analysis. The core finding was clear: Switzerland does not need a root-and-branch rewrite of its legal code to accommodate DLT. What it does need is selective, surgical changes in five distinct areas of law.
The Federal Council's stated ambition runs in two directions simultaneously. On one side, it wants Switzerland to establish and maintain itself as a leading, innovative, and sustainable location for fintech and blockchain companies. On the other, it is equally explicit about the need to combat abuse and protect the integrity and reputation of Switzerland as both a financial centre and a business location. The report is the first formal step in reconciling those two goals.
State Secretary for International Finance Jörg Gasser, alongside senior officials from the Financial System and Markets Division and Capital Markets and Infrastructure, presented the report's technical detail at a media seminar held in Zug, the hub of Switzerland's so-called Crypto Valley. The choice of venue was deliberate: it signalled that the Federal Council views the blockchain sector as genuinely central to the Swiss economy, not a peripheral curiosity.
The Five Areas of Proposed Legal Reform
The Federal Council instructed the Federal Department of Finance and the Federal Department of Justice and Police to prepare a consultation draft by the first quarter of 2019, covering five distinct legal domains. Each carries specific implications for firms using crypto bookkeeping software or managing digital asset positions under Swiss law.
Civil Law: Legal Certainty for Digital Register Transfers
The first reform target is civil law, specifically the transfer of rights by means of digital registers. Under current Swiss law, the legal basis for transferring tokenised rights or claims is not always unambiguous. The proposed adjustment would increase legal certainty around these transfers, which matters enormously for firms that need to book and audit digital asset transactions with confidence that the underlying legal title has actually moved. Without clarity here, accounting entries that reflect a transfer of ownership may be legally contestable, creating contingent liability on the balance sheet.
Insolvency Law: Crypto Asset Segregation in Bankruptcy
This is arguably the highest-stakes reform for accounting teams. The Federal Council wants to further clarify how crypto-based assets are segregated from a bankrupt estate, and also to examine whether data that carries no asset value should be treated separately. Currently, the treatment of digital assets held by a custodian or exchange in Swiss insolvency proceedings can be uncertain. If a custodian fails, clients need to know their assets are ringfenced rather than pooled into the general estate.
For CFOs and auditors, this reform affects two things directly. First, it will influence whether digital assets custodied with a Swiss entity can be recognised as off-balance-sheet for the client, or whether a credit risk provision is required. Second, it will shape the disclosures required around custody arrangements in financial statements. Digital asset accounting software that does not track custody structure and segregation status will leave firms exposed when auditors ask these questions.
Financial Market Law: A New Flexible Licensing Category
The Federal Council proposes creating a new, flexible authorisation category specifically for blockchain-based financial market infrastructures. This matters because existing Swiss licensing frameworks, designed for traditional exchanges and central counterparties, sit awkwardly alongside DLT-native trading systems where settlement is near-instantaneous and there is no central counterparty in the conventional sense.
A purpose-built licensing category would allow DLT-based venues to operate legally without having to shoehorn their business model into a framework built for a different technology. For accounting and compliance teams at firms that access or operate such platforms, a new licence category also means new regulatory perimeters: different capital requirements, different reporting obligations, and potentially different treatment of assets held on those platforms for accounting purposes.
Banking Law: Aligning Insolvency Provisions
The fourth proposed reform reconciles banking law insolvency provisions with the adjustments being made in general insolvency law. This is essentially a coherence measure: if the general insolvency framework is updated to clarify crypto asset segregation, banking law needs to reflect those same principles consistently. For banks that hold digital assets on behalf of clients, or that issue digital asset-linked products, the alignment will affect how those positions are treated in resolution and recovery planning.
AML Law: Decentralised Trading Platforms
Perhaps the most operationally urgent reform for compliance teams is the proposed change to anti-money laundering law. The Federal Council wants to explicitly anchor in statute the existing practice of subjecting decentralised trading platforms to the Anti-Money Laundering Act. Currently, this obligation rests on regulatory practice and interpretation rather than a clear legislative text.
Codifying it removes any ambiguity about whether a DLT-native exchange or automated market maker operating in Switzerland must register, conduct customer due diligence, and file suspicious activity reports. For accounting firms and compliance officers whose clients operate or use such platforms, this change will require a review of onboarding procedures and transaction monitoring controls. Understanding VASP due diligence and AML onboarding frameworks is already essential; the Swiss codification will make it a statutory baseline rather than a best-practice recommendation.
Accounting and Reporting Implications for Firms
Asset Classification and Balance Sheet Treatment
The civil law reform around digital register transfers has a direct read-across to asset classification. If legal title to a tokenised asset can be transferred with greater certainty, auditors and preparers of financial statements will have firmer ground when deciding whether a token represents a financial asset, an intangible asset, or something else. Under both Swiss GAAP and IFRS as applied in Switzerland, the classification affects measurement, impairment testing, and disclosure requirements.
Firms using crypto accounting software need to ensure that their systems can capture the legal form of a digital asset, not just its market value. The incoming reforms will add legal-form metadata as a relevant field for classification decisions.
Custody Risk and Contingent Liabilities
The insolvency law reform has immediate implications for how custody arrangements are disclosed and whether a credit risk provision is needed. Until the law is clarified and enacted, preparers should document their assessment of whether digital assets held with a Swiss custodian would be treated as client assets in a bankruptcy scenario. That assessment should be revisited once the consultation draft is published.
Firms that rely on digital asset accounting software to track custodial balances should check whether their systems can flag the custody structure: self-custody, regulated custodian, or unregulated third party. Each carries a different risk profile under the proposed framework.
AML Compliance Workflows
The explicit anchoring of decentralised trading platforms within the AML Act will require compliance teams to revisit their counterparty onboarding procedures. Any firm whose clients transact on DLT-native platforms in Switzerland should treat the forthcoming legislation as a trigger to review those clients' AML status. The practical steps include confirming whether the platform holds or will hold a Swiss Financial Market Supervisory Authority authorisation under the new flexible licensing category, and verifying that transaction monitoring covers flows through those platforms.
This connects directly to broader questions about how AML obligations apply to VASP onboarding, a framework that Swiss firms will need to stress-test against the specific requirements emerging from this legislative process.
What Firms Should Do Now
Monitor the Consultation Draft
The Federal Council set a first-quarter 2019 deadline for the FDF and FDJP to produce a consultation draft covering all five reform areas. Accounting firms and CFOs with Swiss digital asset exposure should track that draft closely. It will be the first concrete signal of exactly how each reform will be worded and which specific thresholds or definitions will apply.
Review Crypto Bookkeeping Software Capabilities
The reforms collectively increase the granularity of information that accounting and compliance teams will need to capture and report. Digital asset accounting software that handles only price and quantity will be insufficient. Firms should assess whether their systems can record legal form of asset, custody structure, platform type, and AML status of counterparties. If not, the gap needs to be addressed before the new rules take effect.
Prepare for the New Licensing Landscape
The creation of a new flexible licensing category for blockchain-based market infrastructures means that the set of regulated counterparties in the Swiss digital asset market is likely to expand. Accounting firms advising clients on Swiss digital asset activities should begin mapping which platforms their clients use and whether those platforms will need to apply for the new licence. A change in a counterparty's regulatory status can affect its treatment for accounting purposes, particularly around credit risk and the enforceability of netting arrangements.
Frequently Asked Questions
Does the Federal Council report create any immediate legal obligations for Swiss crypto businesses?
No. The report identifies areas where the law needs adjustment and instructs the relevant federal departments to prepare a consultation draft. It does not itself change any law. Obligations will arise only once consultation is complete, legislation is enacted, and it comes into force.
How does the proposed insolvency law change affect how I account for digital assets held with a Swiss custodian?
Until the clarification is enacted, you should document your assessment of whether those assets would be segregated in a custodian's bankruptcy. If segregation is uncertain, a credit risk disclosure or provision may be warranted. Once the reform is enacted and provides clear segregation rights, that assessment can be updated accordingly.
Will decentralised exchanges operating in Switzerland need to register with FINMA under the proposed AML changes?
The Federal Council's proposal is to make the existing practice of treating decentralised trading platforms as subject to the Anti-Money Laundering Act explicit in statute. If enacted as described, platforms that fall within scope will need to meet AML registration and compliance requirements. The consultation draft will clarify the precise scope criteria.
What does the new flexible licensing category mean for firms that access blockchain-based trading venues?
A new authorisation category would give DLT-native trading venues a legitimate regulatory home under Swiss financial market law. For firms that access such venues, it means those counterparties could be regulated entities with defined capital and conduct requirements, which affects credit risk assessment, counterparty due diligence, and potentially the accounting treatment of assets held on those platforms.
How should accounting firms advising Swiss digital asset businesses prepare their crypto accounting software for these reforms?
Firms should assess whether their current digital asset accounting software captures legal form of asset, custody structure type, platform regulatory status, and AML counterparty data. If not, now is the time to build those fields into the system, so that when the new rules are enacted, reporting and compliance workflows can be updated quickly rather than requiring a system rebuild under time pressure.
Source: State Secretariat for International Finance (SIF), Switzerland