The full statement of our working group Regulations regarding the consultation on the work of the Blockchain/ICO working group from the Federal Department of Finance, is published below (in german), this is just an excerpt of it.
Today’s regulation does not yet meet the requirements of the digital world everywhere. This finding is obvious in relation to formal requirements such as “writing”, but goes beyond this and covers the entire process or “life cycle” of legally relevant activities and the associated products and services. The digital world is characterised by the fact that it is constantly evolving, thus very dynamic, that this development takes place in a strongly international network and, moreover, that numerous essential technical possibilities such as “tokens” are initially perceived as “phenomena” rather than can be clearly integrated into the existing legal system due to a lack of clear legal qualifications. All of this results in the following catalogue of basic requirements for meaningful regulation, which claim general and comprehensive validity as principles or, if you like, “10 commandments”, far beyond the questions posed:
1. New technological possibilities do not necessarily require new regulation. New “phenomena” must be identified in advance and analysed in depth from an economic, technical and legal point of view. The decision as to whether regulation is necessary at all only emerges from such a comprehensive analysis. In addition to a well-founded risk analysis, this also includes a realistic cost-benefit analysis (regulatory impact assessment);
2. Regulation only where necessary and appropriate, e.g. to create legal certainty, integrated into existing regulation without contradiction;
3. Principle-based and technology-neutral regulation to keep pace with dynamic technological developments and regulatory trends abroad. Principle-based regulation describes the goal, but leaves room for discretion for the individual path to the goal, which also promotes innovation. Despite the high complexity of the challenges in a dynamic world with more and more digitisation, principle-based regulation can contribute to simplification, clarity and comprehensibility of regulation;
4. Competition-neutral regulation, i.e. in particular general and unrestricted applicability of cross-sectional laws for the protection of consumers/investors such as KKG, DSG and FIDLEG or for the protection of the entire Swiss financial centre such as AMLA to all market participants;
5. Deviating rules are possible (a) for purely technical reasons to ensure the functionality of new techniques or (b) in the case of organisational obligations which can be graded according to the concrete business model with regard to the effective risks within the same basic rules (e.g. independence of management and compliance function) (e.g. possibility for small financial market participants to outsource compliance function). Such deviations, however, are always only possible for the business models actually affected as a case of application of the proportionality principle (otherwise Principles No. 4 and 6 would be violated). In addition, such deviating rules must also be available to established market participants (a) if they use the same technology or (b) in the case of organisational obligations, indirectly through the right to establish or acquire FinTech subsidiaries;
6. Preservation of a uniform or coherent legal system, because “physical” and “digital” are merely different “media” which transport uniform rules; differences are only to be made where this is necessary from a technical point of view. Only a coherent legal system can fulfil its functions and, in particular, promote innovation and progress. On the whole, the legal system must implement the requirements of the digital world as an integrated overall system, namely not only in the area of substantive law, but also in procedural and enforcement law, so that law enforcement is also possible without restriction on the basis of completely digital business processes; it must also not systematically occur that one particular law promotes innovation, another, however, without objective reason, unnecessarily restricts or even prohibits economic activities in the digital world with one-sided prohibition regulation;
7. Obstacles recognised for the digital world must also be liberalised in the physical world, with regard to formal requirements naturally mandatory, but generally necessary to fulfil Principle No. 6; also with regard to Principle No. 4, exceptions and simplifications can only be rejected for a digital presence;
8. Regulation on the basis of an overall concept developed top down, no isolated solutions. The latter are not only confusing, but often inconsistent with the rest of the legal system and also of little help, since they regularly only cover a partial aspect of the problem and are therefore usually short-lived. Such an overall concept must also include the relationship to international law (conflict of laws as well as substantive law);
9. Consistent, early involvement of business and supervisory authorities in legislative processes. The involvement of business helps to assess the essential cornerstones of any regulation, such as the need for simplicity and operationalisation (cf. in the EU REFIT platform). By involving the supervisory authorities, they can be made familiar with concrete technical possibilities, opportunities and risks. This promotes the supervisory authorities’ understanding of the challenges of building the digital world;
10. Technically mass-produced and simple implementation with a reasonable cost/income ratio as a strategic economic objective in the interest of the attractiveness of the Swiss financial centre as a business location and as the logical result of the application of Principles 1-9. Once the new regulation has been implemented, the realisation of this principle requires an effectiveness test or an analysis of the results and effects of the new regulation, again with the involvement of business and supervisory authorities in accordance with Principle No. 9. If the results of this test are unsatisfactory, the findings must lead to a corresponding adjustment of the newly enacted regulation.
Read the full statement (german) here:
Konsultation zu den Arbeiten der Arbeitsgruppe Blockchain:ICO