Switzerland's DLT Act: What the Federal Law on DLT Means for Tokenisation
When Switzerland’s Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology came into force on 1 August 2021, it marked one of the most significant restructurings of Swiss financial law in a generation. Quietly dubbed the “DLT Act” by practitioners, the legislation did not create a new silo for blockchain. Instead, it threaded distributed ledger technology into existing Swiss law across six federal statutes, establishing legal certainty for tokenised assets without abandoning the principles-based, technology-neutral approach that defines the Swiss regulatory tradition. Four years on, the DLT Act remains the most comprehensive legal framework for tokenised securities of any major financial centre, and its influence on jurisdictions from Singapore to Luxembourg continues to grow.
Background: Why Switzerland Acted First
The legislative process that produced the DLT Act began in 2019, when the Federal Council published its initial report on the legal framework for distributed ledger technology. The report identified a specific problem: Swiss law, built around paper-based instruments and centralised intermediaries, offered no clear legal basis for rights that existed only on a distributed ledger. Transferring a tokenised claim was legally ambiguous. Insolvency law did not address what happened to crypto assets held by a custodian. The DLT trading facility — something between a stock exchange and an over-the-counter platform — did not fit any existing licence category.
The Federal Council’s response was characteristically Swiss: surgical amendment of existing law rather than the construction of an entirely new regulatory edifice. Six statutes were modified, including the Code of Obligations, the Banking Act, the Financial Market Infrastructure Act (FMIA), and the Debt Enforcement and Bankruptcy Act. The result was a framework that slots DLT into the existing legal order rather than treating it as an exception to it.
The Three Pillars of the DLT Act
The DLT Act rests on three foundational pillars, each addressing a distinct gap in the pre-existing legal framework.
Pillar One: Ledger-based securities (Registerwertrechte). The most consequential innovation of the DLT Act is the creation of a new legal category of security: the ledger-based security, or Registerwertrecht in German. Before the DLT Act, Swiss law recognised two forms of securities: paper-based instruments (Wertpapiere) and uncertificated securities (Wertrechte) held in a central register. Neither category was adequate for a tokenised instrument whose entire existence is on a distributed ledger.
Ledger-based securities resolve this by recognising that rights can be encoded in and transferred on a DLT system without recourse to paper or a central register. The key legal characteristics are threefold: the rights must be registered on a DLT system agreed upon by the parties; the system must meet specific integrity requirements (immutability, access controls, auditability); and transfer must be possible only via the DLT system itself. Once these conditions are met, the ledger-based security enjoys the same legal standing as a traditional certificated instrument.
This matters enormously for market structure. Traditional securities settlement requires a central securities depository (in Switzerland, SIX SIS) to maintain the definitive register of ownership. Ledger-based securities do not. A bond issuer can go directly to market via a DLT platform, with the ledger itself serving as the authoritative record of ownership and the mechanism of transfer. The disintermediation potential is substantial.
Pillar Two: The DLT trading facility licence. The DLT Act introduced a new regulated entity category under the FMIA: the DLT trading facility. This licence is designed for platforms that want to operate a trading venue for DLT-based assets — including ledger-based securities — but whose business model does not fit neatly into either the stock exchange (Börse) or the multilateral trading facility (MTF) categories.
The DLT trading facility licence is notably broader than its predecessors. It permits a single operator to combine activities that are ordinarily segregated: the operator may simultaneously trade securities, hold assets in custody, settle transactions, and manage a central counterparty function. This integrated model reflects the reality of DLT-based market infrastructure, where the traditional separation of exchange, custodian, and CSD collapses into a single technical system. SIX Digital Exchange (SDX) holds Switzerland’s first DLT trading facility licence.
Pillar Three: Insolvency protection for crypto assets. The third pillar addresses a practical concern that became vividly apparent during the exchange collapses of 2022: what happens to crypto assets held by a custodian that goes bankrupt? Under pre-DLT Act Swiss law, crypto assets held by a custodian on behalf of clients could be treated as part of the custodian’s bankruptcy estate, leaving clients as unsecured creditors. The DLT Act amended the Debt Enforcement and Bankruptcy Act to provide that crypto assets held by a licensed custodian on behalf of clients are segregated from the custodian’s estate and may be returned to clients in the event of insolvency. This single provision materially changes the risk calculus for institutional crypto custody in Switzerland.
Ledger-Based Securities in Practice
The Registerwertrecht framework is, in practice, narrower than it might appear from the statute. Not all tokenised assets qualify. The asset must be a claim (Forderung) or membership right (Mitgliedschaftsrecht) — in other words, a debt or equity instrument. The DLT system must meet the technical and legal integrity requirements prescribed in the Code of Obligations. And the parties must have expressly agreed to the use of ledger-based securities form.
What this means in practice is that the framework is well-suited to tokenised bonds, structured notes, and fund units. It is less immediately applicable to tokenised real estate (which involves property law outside the scope of the DLT Act) or to utility tokens (which are not securities at all). FINMA has been clear that ledger-based securities are subject to the same regulatory perimeter as traditional securities: prospectus requirements under FinSA, distribution rules, and — for fund units — CISA compliance.
Interaction with FINMA’s Existing Framework
The DLT Act’s technology-neutral approach was designed to minimise friction with FINMA’s existing supervisory architecture. In practice, this means that a firm seeking to operate a DLT trading facility must still comply with the full suite of FMIA requirements applicable to trading venues — market surveillance, participant admission criteria, system resilience standards — in addition to the DLT-specific provisions. Similarly, issuers of ledger-based securities that constitute collective investment schemes remain subject to CISA authorisation requirements. The DLT Act creates no carve-outs from existing financial market law; it simply ensures that DLT-based structures can fit within that law.
FINMA has published guidance confirming that its ICO guidelines, first issued in 2018, remain operative alongside the DLT Act. Tokens that are payment tokens, utility tokens, or asset tokens are assessed against their economic function, regardless of whether they are issued as ledger-based securities. The DLT Act adds legal certainty for the asset token category without displacing FINMA’s broader analytical framework.
SIX Digital Exchange and Early Adopters
The most visible user of the DLT Act framework is SIX Digital Exchange, which received its DLT trading facility licence in September 2021 — the first such licence issued globally. SDX has since hosted tokenised bond issuances from the World Bank, several Swiss cantons, and — before its absorption into UBS — Credit Suisse. These issuances have validated the ledger-based securities framework in live market conditions, with institutional settlement conducted entirely on SDX’s permissioned blockchain.
Beyond SDX, a secondary market of direct issuers has emerged. Several Swiss-domiciled companies have issued ledger-based bonds directly via DLT platforms without listing on SDX, leveraging the framework’s dispensation from central register requirements to access capital more efficiently than via traditional channels.
Switzerland vs the EU: A Regulatory Contrast
The DLT Act stands in notable contrast to the European Union’s approach. The EU’s DLT Pilot Regime, which came into force in March 2023, operates as a time-limited sandbox for DLT-based market infrastructures — a three-year experiment rather than permanent law. MiCA, which covers crypto-assets broadly, explicitly excludes tokenised securities, which remain regulated under MiFID II and the Prospectus Regulation. The EU has, in effect, built a bridge to DLT-based securities markets through regulatory experimentation rather than statutory reform.
Switzerland’s approach — amending foundational commercial and financial law to accommodate DLT — offers greater legal durability. A ledger-based security issued under the DLT Act is not a regulatory experiment; it is a legally recognised instrument under Swiss civil and commercial law. The trade-off is that Swiss tokenised securities are third-country instruments for EU investors, with no automatic passport into the EU single market.
The Road Ahead
The Federal Council has signalled that further adaptation of Swiss law to DLT developments remains on the legislative agenda. Areas under active consideration include the treatment of tokenised collective investment schemes under CISA, the cross-border recognition of ledger-based securities, and the potential extension of the DLT trading facility concept to secondary market trading of private equity tokens.
FINMA’s supervisory posture has evolved alongside market practice. The regulator has demonstrated a willingness to engage with novel structures through its no-action letter and individual authorisation processes, providing a pragmatic complement to the statutory framework. As the global race for tokenised securities infrastructure accelerates, Switzerland’s four-year head start under the DLT Act — and the institutional knowledge embedded in FINMA’s supervisory experience — represents a durable competitive advantage.
Conclusion
The DLT Act is not a blockchain law in the colloquial sense. It is a systematic modernisation of Swiss financial and commercial law to accommodate a new form of asset — one that exists on a ledger rather than on paper or in a central register. Its three pillars — ledger-based securities, the DLT trading facility licence, and insolvency protection for crypto assets — address the specific legal gaps that previously made Switzerland an uncertain domicile for tokenised instruments. Four years into its operation, the framework has proved sufficiently robust to support live institutional issuances and the world’s first regulated DLT exchange. The more interesting question is not whether the DLT Act works, but how much further Switzerland will need to adapt its legal infrastructure as tokenisation moves from pilot to mainstream.
Donovan Vanderbilt is a contributing editor at ZUG DLT, a publication of The Vanderbilt Portfolio AG, Zurich. The information presented is for educational purposes and does not constitute investment advice.