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How Crypto-Tokens qualify under Swiss Law: a comprehensive Framework

Posted by on 23 November 2017

Blockchain technology has become a reality as part of the digitalisation of the economy. Every day, there is proof of disruptive transformations of long-standing mechanisms into new ecosystems on the blockchain. While existing market participants are in many cases overwhelmed by the new normal, the new players operate with the greatest creativity and efficiency.

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There are no limits to the new ecosystems. The blockchain offers countless possibilities of disintermediation, of participating in and transferring assets, of recordkeeping and of creating e-commerce beyond the boundaries of national currencies. And we are only at the beginning of this transformation.

Tokens created on the blockchain can be used to represent a wide variety of instruments and processes. For example, a new means of payment can be created or indirect rights to shares, loans or access rights can be digitised. The legal qualification of the tokens is a major challenge due to the aforementioned diversity. 

The important (and not so new) principle for finding your way around in this new digital environment is: “first analyse the context, then undertake the legal classification under the rules of the existing laws.” The hybrid nature of many tokens will defy the clear categories within which the law is typically structured and any attempt to commence by looking at traditional legal instruments and impose them on the tokens of the new ecosystems will therefore fail. Instead each token has to be taken apart and its components must be qualified individually.

In order to bring the tokens of the new ecosystems closer to the public, FRORIEP's Disruptive Technologies Practice Group has developed a Token Framework. In doing so, a distinction is made between cryptocurrencies, tokens giving title to monetary claims and tokens for other purposes. Tokens giving title to monetary claims are further categorised as being either debt, equity or participation rights tokens. These subcategories stem from the financial treatment of the obligations on the balance sheet or (in the case of participation rights tokens) on the profit & loss statement of the issuer.

Click on the button below to download this article with two interesting graphics on "Utilisation of Blockchain" and an overview on "Possible Framework of Tokens under Swiss Law".

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This article and the commentary contained in it are not legal advice and any organisation or person using this article should not rely upon it as such. The field of Initial Token Offerings is very complex which is open to interpretation under applicable law. There is currently very limited guidance and commentary by authorities regarding Initial Token Offerings in Switzerland. The content of this article is limited to the laws of Switzerland. It is strongly recommended that organisations or persons seek legal advice on how to prepare for an Initial Token Offering.


If you liked this article, you might also be interested in reading more from the same series:

Starting an Initial Token Offering (ITO, also called Initial Coin Offering or ICO) - things to consider, by Ronald Kogens

Blockchain for Patents - Patents for Blockchain a guestblog, by Dany Vogel, Swiss and European Patent Attorney at Rentsch Partner AG

Spotlight on Copyright Issues of Blockchain Technology, a guestblog by Demian StauberAttorney at Law in the fields of Intellectual Property and ICT law at Rentsch Partner AG 


About our new practice area:

Disruptive Technologies

Blockchain, cryptocurrencies, sharing economy and crowdfunding, e-payments, internet of things, cloud computing, artificial intelligence, virtual and augmented reality, machine learning, quantum computing, autonomous vehicles, 3D printing.

These are just some of the promising and disruptive ideas and innovations for which we have advised and are advising on legal aspects and the regulatory environment.

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Topics: | Disruptive Technologies

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Dr. Catrina Luchsinger Gähwiler

Catrina is a specialist in financial market law and corporate law. She has a wealth of experience advising financial market clients, including banks, asset managers and investment vehicles, as well as substantial operational knowledge. She also serves on the management boards of various com-panies, some of which are in the financial services sector. Catrina joined our firm as an associate in the year 2000. She became a partner in 2007. Catrina advises financial services clients and investment companies on regulatory issues as well as on contractual aspects relating to the financial market industry. She furthermore has considerable experience in acquisition and financing transactions, in general corporate work, both for listed and privately held companies, in mergers and acquisitions – predominantly in the financial services sector – and regularly advises in equity capital market transactions both for SIX Swiss Exchange, where she is admitted as a listing agent, and for BX Berne eXchange. Chambers Europe and Chambers Global have identified her as a Recognised Practitioner in the field of banking and finance, where clients have commended her client orientation. She is also ranked as a leading lawyer in the IFLR1000 guide for financial services regulatory and M&A. Catrina obtained her law degree from the University of Zurich in 1991 and was admitted to the Zur-ich Bar in 1995. She gained her PhD in 2004. Her working languages are German, English and French. She is a member of the Zurich Bar Association, the Swiss Bar Association, the International Bar Association (IBA) and the International Pacific Bar Association.

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Ronald Kogens

Ronald Kogens’s practice is focused on disruptive technologies. He advises Swiss and international clients as well as public entities in corporate and technology-related transactions. Ronald Kogens has in-depth knowledge of IP/IT law, in particular licensing of IP-rights, IP-transaction, financial market and contract law. He is an expert in the field of blockchain technology, crypto-currencies and crypto-tokens. He joined Froriep in 2017 as an associate and became partner in July 2019. Before that he worked for a major global consulting firm. He was also part of the legal counsel team of a public listed pharmaceutical company at the headquarters in Switzerland and worked for its subsidiary in the United States. Ronald Kogens graduated in law from the University of Lucerne in 2011 and was admitted to the St. Gallen Bar in 2012. In 2016 he was awarded a Master of Laws (LL.M.) in business law from the Chapman University, California, United States. His working languages are German and English.

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