The Swiss government has enacted new financial laws encouraging the growth of blockchain startups. The new laws will eliminate legal barriers to crypto-based businesses and leave the favorable ones intact.
The Swiss National Council unanimously passed a new legislative package on June 17, 2020, to change several financial laws. The changes are proposals by the Swiss Federal Council that were meant to remove legal barriers to blockchain and distributed ledger technology-based applications.
Examine Existing Tax Laws
On June 19, the Federal Council acknowledged a report prepared by the Federal Department of Finance that concluded there was no need to make appropriate amendments to existing tax laws concerning blockchain. The report was commissioned by the Federal Council in 2018 when the government decided to examine existing tax laws and assess any need for amendments.
The Federal Authority said that Switzerland doesn’t need to amend the existing tax legislation on Blockchain and Distributed Ledger Technology (DLT). The Swiss Department of Finance said that blockchain and digital currencies are fully compatible with the existing legal frameworks. The department believes there was no immediate requirement for specific legislation for the sector.
Existing Legislation Had Proved Its Worth
The Swiss Finance department made the declaration in a recent report following the conclusion of year-long research. The project had the objective of checking whether the existing tax structures apply to the digital currency and blockchain sectors. In the report posted on their website, the lawmakers agreed that the existing legislation had proved its worth in matters of taxing digital currency transactions and holdings. The reports stated:
“As regards income, profit, wealth, and capital gains taxes, the existing legislation has proved its worth. Existing VAT law also covers arrangements based on distributed ledger technology (DLT) and blockchain. Therefore, no legislative action is necessary as regards special tax provisions for the new instruments.”
Existing Laws Are Cumbersome
Switzerland has been the go-to place for blockchain startups. The City of Zug became the epicenter for token-funded projects during the 2017 Initial Coin Offering (ICO) craze. The association with blockchain and cryptocurrency earned the city the nickname Crypto Valley. ICOs are no longer popular, but the city’s enthusiasm for blockchain technology remains. A professor of financial market law and chair of the working group for regulatory issues at the Swiss Blockchain Federation, Rolf H. Weber said:
“It’s known that Switzerland is very much trying to encourage blockchain business. It’s a political objective.”
The proposed changes are based on last year’s Federal Council’s proposals which they will refer to the Council of States for a final vote. Swiss Federal Tax Administration communication specialist Joel Weibel added that Swiss laws ought to guarantee legal certainty and the openness of authorities to new technologies. The existing laws regarding security tokens are cumbersome, where all transfers have to be done in writing. The new regulation addresses these peculiarities and makes the transfer of security tokens easier, Weber argued. He added:
“In my opinion, the most important changes are in company and securities law.”