When the Swiss Federal Assembly passed the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology in September 2020, with provisions taking effect through August 2021, many industry observers questioned whether legislative reform could keep pace with technological change. Three years into full implementation, the DLT Act has proven to be precisely the kind of measured, principles-based regulation that institutional players demanded.
Architecture of the Framework
Rather than creating an entirely new regulatory regime, the DLT Act amended ten existing federal laws to accommodate DLT-based applications. This approach — sometimes called the “Swiss knife” model — ensured compatibility with existing legal infrastructure while creating space for innovation.
The key innovations included the creation of DLT securities (ledger-based securities under the Code of Obligations), a new DLT trading facility license category under the Financial Market Infrastructure Act, and provisions for the segregation of crypto assets in bankruptcy proceedings.
Impact on Zug
For Zug-based companies, the DLT Act transformed the operating environment. Tokenisation platforms could now issue securities with full legal certainty. Custody providers gained clear frameworks for segregating client assets. And the new DLT trading facility license — first granted to SDX and subsequently to several Zug-based platforms — created regulated venues for secondary trading of digital securities.
The Canton of Zug has been the primary beneficiary, with FINMA-licensed entities increasingly choosing Zug as their domicile. The combination of the federal regulatory framework with Zug’s low tax rates and deep blockchain expertise creates a proposition that competing jurisdictions have struggled to match.
Institutional Flows
The most tangible outcome has been institutional adoption. Swiss pension funds have begun making exploratory allocations to tokenised bonds and real estate funds. Private banks in Zurich and Geneva offer crypto custody through Zug-based technology partners. And international institutional investors cite the Swiss regulatory framework as a key factor in their willingness to engage with digital assets.
Looking Forward
The DLT Act’s success lies in its adaptability. The principles-based approach means the framework can accommodate developments in DeFi, NFTs, and AI-blockchain convergence without requiring legislative overhaul. FINMA’s guidance notes and practice have evolved to address emerging use cases, maintaining the balance between innovation and investor protection that defines the Swiss approach.