Tokenised Equities in Switzerland: Legal Framework, Market Structure, and Investment Opportunities

The tokenisation of equities represents one of the most consequential developments in Swiss capital markets since the introduction of the Federal Intermediated Securities Act in 2010. By encoding share ownership onto distributed ledger infrastructure, Swiss issuers and investors are accessing a capital formation mechanism that compresses settlement cycles, reduces intermediary costs, and opens fractional ownership to a broader investor base. Switzerland’s purpose-built DLT Act, which entered into force on 1 August 2021, provides the legal certainty that makes this transformation possible.

Legal Foundations Under Swiss Law

Swiss corporate law has long recognised uncertificated securities (Wertrechte) under Article 973c of the Code of Obligations. The DLT Act extended this framework by introducing DLT securities (Registerwertrechte) under the newly inserted Article 973d. A DLT security is a right that is registered on a securities ledger and can only be asserted and transferred via that ledger. This innovation collapses the distinction between the security and its registry entry, creating a natively digital instrument with full legal standing.

For a tokenised equity to qualify as a DLT security, the underlying ledger must satisfy specific requirements. It must grant creditors, but not the debtor, the power to dispose of their rights. The ledger must be protected against unauthorised modification through appropriate technical and organisational measures. The content of the rights, the functioning of the ledger, and the registration agreement must be recorded either in the ledger itself or in accompanying data.

The registration agreement between the issuer and the token holder is a critical component. It establishes the terms under which equity rights are created, transferred, and extinguished on the ledger. Swiss practitioners have developed standardised registration agreements that address corporate actions, voting rights, dividend distributions, and the interaction between on-chain records and the commercial register.

Market Infrastructure: SDX and Beyond

The SIX Digital Exchange (SDX) operates as Switzerland’s regulated venue for the issuance, trading, settlement, and custody of tokenised securities. Licensed by FINMA as both a stock exchange and a central securities depository under the Financial Market Infrastructure Act (FMIA), SDX provides institutional-grade infrastructure for tokenised equities. Its integrated model eliminates the separation between trading and post-trade processing that characterises traditional markets.

SDX settlement operates on an atomic delivery-versus-payment (DvP) basis, meaning that the transfer of the tokenised equity and the corresponding payment occur simultaneously and irrevocably. This eliminates counterparty risk during the settlement window — a structural improvement over the T+2 settlement cycle that still prevails in conventional equity markets. For institutional investors accustomed to managing settlement risk through collateral and margin requirements, atomic DvP represents a material reduction in operational complexity.

Beyond SDX, several Swiss platforms facilitate tokenised equity issuances for smaller enterprises. These platforms typically operate under lighter regulatory frameworks, serving the private placement market rather than public listings. The distinction matters: publicly traded tokenised equities on SDX are subject to the full disclosure and market conduct requirements of the FMIA, whereas private placements benefit from exemptions under the Financial Services Act (FinSA).

Corporate Governance Considerations

Tokenised equities raise important questions about how shareholders exercise their governance rights. Swiss company law requires that shareholders be identified for general meeting participation and voting. With bearer shares effectively abolished for unlisted companies since 2015, the shift toward registered tokenised shares aligns with Switzerland’s broader transparency objectives.

Several approaches have emerged for managing governance in a tokenised context. Some issuers maintain an off-chain shareholder register that is synchronised with the on-chain token registry, ensuring that corporate law requirements are met while preserving the efficiency benefits of DLT-based transfers. Others are exploring on-chain voting mechanisms that allow token holders to participate in general meetings directly through the ledger infrastructure.

The interaction between tokenised equities and the Swiss commercial register also requires careful navigation. Share capital changes, capital increases, and other corporate events must still be recorded in the commercial register. The challenge lies in ensuring consistency between the on-chain token supply and the registered share capital — a problem that smart contract-based corporate actions are beginning to address.

Fractional Ownership and Market Access

One of the most frequently cited advantages of tokenised equities is the ability to offer fractional shares. By dividing a single share into smaller units represented by tokens, issuers can lower the minimum investment threshold and attract a wider investor base. This is particularly relevant for high-value Swiss equities, where single-share prices can represent a significant commitment for retail investors.

However, fractional ownership in Swiss law is not without complexity. A fractional token does not necessarily confer fractional voting rights or fractional entitlement to dividends unless the issuer’s articles of association and the registration agreement explicitly provide for such arrangements. Legal practitioners have developed structures that address these issues, typically through the creation of a special class of shares designed for fractional tokenisation.

The regulatory treatment of fractional tokenised equities also depends on how they are offered. If fractional tokens are marketed to the public, the issuer may be required to produce a prospectus under FinSA, unless an exemption applies. The threshold exemptions — such as the CHF 8 million offering limit or the qualified investor exemption — are frequently relied upon by tokenised equity issuers in the Swiss market.

Tax Implications

The Swiss Federal Tax Administration has provided guidance on the tax treatment of tokenised securities, classifying them according to their economic function rather than their technological form. Tokenised equities that represent genuine share ownership are treated as equity participations for tax purposes, meaning that dividends are subject to the 35 per cent federal withholding tax and capital gains realised by private investors are generally exempt from income tax under the private capital gains exemption.

For corporate holders, the participation deduction (Beteiligungsabzug) may apply to dividends received on tokenised equities, provided the participation thresholds are met. The issuance of tokenised equities is subject to the one per cent issuance stamp duty (Emissionsabgabe), calculated on the fair market value of the issued shares. Transfer stamp duty (Umsatzabgabe) applies to secondary market transactions involving a Swiss securities dealer, at a rate of 0.15 per cent for Swiss securities.

International tax considerations add further complexity. Cross-border holders of tokenised Swiss equities must navigate double taxation agreements, beneficial ownership requirements for withholding tax relief, and the reporting obligations under the Automatic Exchange of Information (AEOI) framework. The transparency of DLT-based ownership records may actually facilitate compliance with these requirements, as the identity of beneficial owners is more readily ascertainable than in traditional bearer instrument structures.

Risk Factors and Investor Considerations

Investors considering tokenised equities should weigh several risk factors specific to the DLT context. Technology risk encompasses the possibility of smart contract vulnerabilities, ledger failures, or consensus mechanism compromises that could affect the integrity of ownership records. While institutional platforms like SDX employ rigorous security measures, the technology remains comparatively young.

Liquidity risk is another material consideration. The secondary market for tokenised equities is still developing, and trading volumes on digital exchanges lag significantly behind those on traditional venues. Investors should be prepared for wider bid-ask spreads and potential difficulty in executing large orders without market impact.

Regulatory risk, while mitigated by Switzerland’s comprehensive DLT Act, remains relevant. The international regulatory landscape for tokenised securities is evolving rapidly, and changes in foreign jurisdictions could affect the cross-border tradability of Swiss tokenised equities. The European Union’s DLT Pilot Regime, which entered into force in 2023, creates both opportunities and challenges for Swiss issuers seeking access to EU capital markets.

Custody arrangements for tokenised equities differ from traditional securities custody. Investors must understand whether their tokens are held in self-custody (where the investor controls the private keys), in omnibus custody (where a custodian holds tokens on behalf of multiple clients), or in segregated custody (where each client’s tokens are held separately). Each model carries different risk profiles regarding insolvency protection and operational security.

Outlook for Swiss Tokenised Equity Markets

The trajectory of tokenised equities in Switzerland points toward gradual institutional adoption rather than rapid disruption. Major Swiss banks are building tokenisation capabilities, either through partnerships with SDX or through proprietary platforms. The issuance of tokenised bonds by public sector entities — including the Swiss Confederation’s digital bond programmes — is establishing precedent and building market confidence that is expected to extend to equity instruments.

The convergence of tokenised and traditional markets is likely to accelerate as interoperability solutions mature. Projects that bridge DLT-based settlement systems with conventional central securities depositories will enable investors to hold and trade tokenised equities alongside traditional securities within a unified portfolio. For the Swiss market, where institutional investors demand seamless integration with existing infrastructure, this interoperability is a prerequisite for mainstream adoption.

Switzerland’s position as a jurisdiction of choice for tokenised equity issuance rests on the combination of legal clarity, institutional infrastructure, and regulatory pragmatism that has characterised its approach to financial innovation. As other jurisdictions develop their own frameworks for DLT securities, Switzerland’s first-mover advantage provides a foundation for continued leadership in this transformative segment of capital markets.

For further context on Switzerland’s DLT regulatory framework, see our DLT Act overview and SDX clearing and settlement analysis.

Donovan Vanderbilt is a contributing editor at ZUG DLT, covering distributed ledger technology law, regulation, and institutional adoption from Zurich. The Vanderbilt Portfolio AG provides research and analysis on Swiss digital asset infrastructure.