How Swiss DLT Opens the Door to Asset Tokenization and Efficient Trading

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Bittime - In this article we will get to know Distributed Ledger Technology, specifically Swiss DLT. Understand the function, how it works and the applicable laws. Read more!

Understanding Swiss DLT

Distributed Ledger Technology or Swiss DLT is the legal framework governing the use of distributed ledger technology in Switzerland. DLT Switzerland creates a comprehensive legal basis to address the development of Electronic Register Distribution (DLT) technology amidst the rapid growth of the blockchain and crypto sector in Switzerland.

Swiss DLT function

The main function of Swiss DLT is to provide a clear and comprehensive legal framework for the use of distributed ledger technology in various economic sectors in Switzerland. 

This includes regulations on asset tokenization, DLT securities trading, and money laundering prevention measures to safeguard Switzerland's financial integrity.

How Swiss DLT Works

Swiss DLT works by changing and adapting various existing federal laws in Switzerland. This approach provides legal flexibility to respond to rapid technological change. The law includes provisions related to the handling of digital assets, the issuance of DLT securities, and the facilitation of DLT trading.

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Swiss DLT example

Examples of the application of Swiss DLT can be found in various sectors, especially in the financial sector and capital markets. With this law, companies can tokenize their assets, such as stocks, bonds, and other financial instruments, creating “ledger-based securities.” 

It enables the electronic transfer of assets on a blockchain or distributed ledger, bringing new efficiencies and speed to trading and settlement.

Advantages and Disadvantages of Swiss DLT

Advantages of Swiss DLT

• Innovation: Swiss DLT provides a legal basis for innovation in the financial and technology sectors, creating new opportunities for the use of distributed ledger technology.
• Legal Certainty: With clear laws in place, market participants have legal certainty in using DLT technology, paving the way for investment and growth.

Disadvantages of Swiss DLT

• Specific Applications: Despite addressing some aspects of DLT technology, successful implementation requires deep understanding and adaptation across sectors, which may take time.
• Dependence on Reputation: The success of Swiss DLTs may be influenced by the extent to which market participants trust Switzerland's reputation as a stable financial center.

Swiss DLT Trading Facility

The Swiss DLT trading facility is one of the significant innovations in this legal framework. It creates a DLT or blockchain based trading platform that enables the trading, clearing, settlement and storage of DLT based assets. These trading facilities provide access to markets not only for financial institutions but also for individuals, increasing financial inclusion.

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Swiss DLT Law and Money Laundering Prevention

The Swiss DLT Act recognizes the importance of preventing money laundering in the development of the token economy. Therefore, this law makes adjustments to the Financial Services Act, Money Laundering Act (AMLA), and Banking Act to include DLT trading facilities as financial intermediaries subject to AML rules. 

This ensures that international standards are applied consistently within the Swiss DLT ecosystem.

Swiss DLT Conclusion

Swiss DLT paves the way for a significant transformation in the way assets are managed and traded in Switzerland. By providing legal certainty and recognizing the importance of preventing money laundering, Swiss DLT creates a conducive environment for the growth of distributed ledger technology. 

While its long-term success remains to be seen, Swiss DLT has established a strong foundation for future innovation and economic development.

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