DLT Act (Swiss Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology)

The Swiss Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology, commonly called the DLT Act, entered into force in stages between February and August 2021. Rather than establishing a standalone regulatory framework for blockchain or crypto-assets, the Swiss approach involved targeted amendments to multiple existing federal laws — the Code of Obligations, the Financial Market Infrastructure Act, the Banking Act, the Debt Enforcement and Bankruptcy Act, and others — to accommodate distributed ledger technology within the existing Swiss legal framework.

Legislative Approach

Switzerland chose a technology-neutral approach to DLT legislation. Rather than creating a separate regulatory regime for blockchain-specific activities, the Federal Council amended existing laws to remove obstacles to DLT-based financial activities and to create new legal categories where existing law provided no adequate basis.

This reflects a broader characteristic of Swiss financial regulation: a preference for principle-based rules that accommodate technological change without requiring repeated legislative revision. The Federal Council identified specific legal gaps — situations where existing law either could not accommodate DLT-based instruments or created unintended consequences for DLT participants — and addressed them with surgical amendments.

Ledger-Based Securities

The conceptually most significant innovation of the DLT Act is the creation of ledger-based securities (Registerwertrechte in German) as a new category of uncertificated securities in Swiss law.

Traditional Swiss securities exist in three forms: bearer securities, registered securities, and uncertificated securities (Wertrechte). The DLT Act adds a fourth: ledger-based securities, which are uncertificated securities entered in a securities ledger. A securities ledger must meet technical requirements ensuring that only the holder can dispose of the security, that the integrity of the record is protected, and that the rights associated with the security are accessible to the holder.

This legal category enables the tokenization of securities in Swiss law without requiring a central securities depository as intermediary. A bond, share, or other financial instrument represented as a ledger-based security exists natively on the DLT system and can be transferred by updating the ledger record, with the legal effect of traditional securities transfer.

The creation of this category resolved a fundamental legal question for Swiss market participants: what is the legal nature of a tokenized security under Swiss law, and how is ownership transferred? With ledger-based securities, Swiss law provides clear answers.

DLT Trading Facility

The DLT Act created a new licence category under the Financial Market Infrastructure Act: the DLT trading facility. This licence is designed for trading systems that combine the functions of a trading venue and a post-trade infrastructure in an integrated DLT environment — similar in concept to the DLT TSS category in the EU’s DLT Pilot Regime, though the Swiss framework is permanent rather than experimental.

A DLT trading facility can be authorized to operate a platform for the trading, issuance, settlement, and custody of DLT-based securities. The requirements for authorization include operational resilience, market integrity rules, access conditions, and settlement finality. Capital requirements are calibrated to the scope of activities authorized.

FINMA developed detailed implementing regulations for the DLT trading facility licence, engaging with market participants to ensure the requirements were workable for the types of DLT infrastructure being developed.

Insolvency Segregation

One of the most practically important provisions of the DLT Act addresses the treatment of crypto assets in insolvency proceedings under the Debt Enforcement and Bankruptcy Act. Prior to the DLT Act, it was unclear whether crypto assets held by an intermediary (such as a crypto exchange or custodian) on behalf of customers would be treated as segregated customer property — available to customers with priority over the insolvent firm’s general creditors — or as assets of the insolvent estate available to all creditors.

The DLT Act resolves this ambiguity: crypto assets held by an intermediary for customers are segregated from the intermediary’s estate in insolvency. This gives customers a property claim rather than an unsecured creditor claim, significantly improving the legal position of customers in the event of exchange insolvency.

This provision was prescient: the FTX collapse in November 2022, occurring after the DLT Act’s entry into force, illustrated exactly why insolvency segregation provisions matter. Customers who had assets on exchanges without segregation requirements faced substantial losses; Swiss law provided a clearer and more protective answer.

FINMA Implementation

The Swiss Financial Market Supervisory Authority (FINMA) implemented the DLT Act through guidance, circulars, and the authorization process for DLT trading facility applicants. FINMA had already developed a framework for analyzing token offerings under existing financial market law — its 2018 ICO guidance had become an international reference — and the DLT Act built on FINMA’s established analytical approach.

SDX as Implementation Example

SIX Digital Exchange (SDX), the digital exchange operated by SIX Group (the operator of the Swiss Exchange), was among the first entities authorized by FINMA to operate under the DLT Act framework. SDX operates both a regulated DLT exchange and a CSD for digital assets, and has issued and settled tokenized bonds for Swiss issuers including the World Bank. SDX demonstrates the practical implementation of ledger-based securities in a regulated, institutional-grade environment.