The Swiss Blockchain Federation recently published the Swiss Digital Asset Custody Report 2023, its inaugural paper on the custody of digital assets in Switzerland. Sharing insights from 34 survey respondents, the report gives an overview of the country’s digital asset ecosystem as well as the opportunities, risks and regulatory uncertainties in the sector.

“At the beginning of this digital asset journey is the safekeeping, or custody, of these new assets,” acknowledges the report. Yet, out of the 34 respondents, more than a quarter of which have roots in traditional finance, only 20.6 percent offer custody services for digital securities. Most focus on custodial services for cryptocurrencies. The report points out that this is “a reflection of the nascent state of security or asset tokens”.

A natural advantage

Given the strength of its banking sector, “digital asset custody is a natural extension of Switzerland’s private banking legacy”, states the report. It also claims that Swiss law is “particularly avant-garde in its approach to professional custody”, citing the Lex DLT law as an example. Established in 2020, the law is described as an “adaptation of federal legislation to the developments of distributed electronic ledger technology”.

PostTrade 360 Nordic 2024

However, despite these measures, the report identifies two missing links in the widespread adoption of digital assets in the country’s financial services industry: custody standards, and a deposit token, or digital form of the Swiss franc. The former is important in providing secure storage, asset verification, and legal compliance. The latter has applications in the trading and settlement of digital assets as well as decentralised finance.

The report concludes that “an alternative to self-custody is undoubtedly necessary to enable ledger-based securities to take off”.