Switzerland FINMA DLT Fund Regulation

Switzerland’s DLT Act and Fund Tokenization

Switzerland’s Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (DLT Act), which entered into force in stages between August 2021 and August 2023, represents the most comprehensive legislative framework for DLT-based financial activities among developed economies. The DLT Act systematically amended ten existing federal laws to comprehensively accommodate blockchain technology, creating explicit legal foundations for tokenized securities, DLT trading venues, and digital asset custody.

Legal Framework for Tokenized Fund Shares

The DLT Act introduced the concept of “ledger-based securities” (Registerwertrechte) into the Swiss Code of Obligations (Article 973d et seq.). Ledger-based securities are rights that are recorded on a DLT-based securities ledger and can only be exercised and transferred through that ledger. Fund shares — including units of Swiss collective investment schemes under the Collective Investment Schemes Act (CISA) — may be issued as ledger-based securities.

FINMA, Switzerland’s financial market supervisory authority, oversees the issuance of ledger-based fund shares within the CISA framework. Swiss fund managers (licensed under CISA as fund management companies) may issue tokenized fund shares subject to: compliance with all existing CISA requirements for the relevant fund type; additional disclosures in fund documentation addressing DLT-specific risks; and custodial arrangements satisfying CISA requirements with DLT-specific controls.

SIX Digital Exchange (SDX)

SIX Group, the operator of Switzerland’s principal stock exchange (SIX Swiss Exchange), has launched SIX Digital Exchange (SDX) — a fully regulated DLT-based securities exchange and central securities depository. SDX received FINMA authorization in September 2021, making it one of the first fully regulated DLT market infrastructures globally.

SDX supports the trading and settlement of tokenized securities, including fund shares. For tokenized ETFs, SDX provides: regulated listing venue compliant with Swiss exchange regulation; atomic settlement using DLT-based delivery-versus-payment; and integration with SIX’s traditional securities infrastructure for interoperability with non-tokenized markets.

SDX has also obtained authorization as a DLT trading facility under the Financial Market Infrastructure Act (FMIA), as amended by the DLT Act. This authorization encompasses both trading and post-trade functions, enabling SDX to serve as a comprehensive market infrastructure for tokenized fund products.

Crypto Fund Regulation

Unlike most jurisdictions, FINMA has approved Swiss-domiciled funds that invest directly in crypto assets. Crypto Broker AG (now part of Bitcoin Suisse) obtained FINMA authorization for crypto asset fund management in 2019, and several Swiss crypto investment funds operate under CISA regulation.

This permissive stance extends to tokenized versions of these crypto funds — creating a jurisdiction where both the underlying portfolio (crypto assets) and the fund wrapper (tokenized shares) can be fully regulated. The dual-layer regulatory clarity exceeds what most other jurisdictions — including the US, EU, and Hong Kong — currently provide.

Cross-Border Distribution

Swiss fund products — including tokenized fund shares — may be distributed cross-border subject to the regulatory requirements of host jurisdictions. Switzerland’s mutual recognition agreements with the EU (limited to bilateral agreements rather than EEA membership) restrict the passporting of Swiss funds into EU markets, requiring separate registration or private placement exemptions.

For tokenized fund sponsors targeting global distribution, Switzerland’s comprehensive legal framework makes it an attractive domicile for fund structuring, even if distribution requires separate regulatory compliance in target markets. The combination of legal certainty, regulatory sophistication, and DLT infrastructure (through SDX) positions Switzerland alongside Luxembourg (which enacted the Blockchain IV Law on December 19, 2024, introducing a control agent concept and authorized the first tokenized UCITS in 2024) as a premium domicile for tokenized fund products, in a global market where the tokenized treasury segment alone has reached $11.70 billion across 73 products and 55,520 holders — led by BlackRock’s BUIDL at $2.01 billion.

FINMA’s Practical Approach to Smart Contract Risk

FINMA’s regulatory approach to smart contracts governing tokenized fund operations reflects Switzerland’s principles-based regulatory tradition. Rather than prescribing specific technical standards, FINMA expects fund management companies to demonstrate that their smart contract governance addresses the following risk categories:

Code correctness: Fund managers must obtain independent smart contract audits from qualified firms before deploying contracts that govern tokenized share issuance, transfer, or redemption. FINMA expects audit scope to cover: functional correctness (the contract implements the fund’s rules accurately); security analysis (the contract is resistant to common vulnerabilities including reentrancy, integer overflow, and unauthorized access); and economic analysis (the contract’s tokenomics align with the fund’s stated economics). The smart contract audit guide provides detailed standards for these assessments.

Operational continuity: FINMA requires fund management companies to maintain operational continuity plans that address smart contract-specific risks, including: procedures for pausing smart contract operations in the event of a detected vulnerability; upgrade mechanisms that preserve investor rights during contract migration; and fallback procedures for manual processing if smart contract infrastructure becomes unavailable.

Regulatory compliance automation: Swiss tokenized fund products increasingly use smart contracts to automate regulatory compliance functions, including: transfer restrictions based on investor accreditation status; automatic tax withholding for distributions to non-resident investors; and NAV-based pricing enforcement for subscription and redemption transactions. FINMA views compliance automation positively but requires fund managers to maintain human oversight capabilities and manual override procedures.

Swiss Collective Investment Schemes Act (CISA) and Tokenization

The CISA framework governs all collective investment schemes in Switzerland, including tokenized fund products. CISA provides for several fund types, each with specific tokenization characteristics:

Contractual funds (FCP): The most common Swiss fund type, FCPs are based on a collective investment contract between the fund management company, the custodian bank, and the investors. Tokenized FCP units represent contractual rights recorded on a distributed ledger rather than in a traditional unit register. The fund management company remains responsible for maintaining the register, whether maintained traditionally or on-chain.

SICAVs (open-ended investment companies): SICAVs issue shares that can be tokenized as ledger-based securities under Article 973d of the Code of Obligations. Tokenized SICAV shares combine the corporate governance features of a company structure with the settlement efficiency of blockchain-based share transfer.

Limited partnerships for collective investment (LP-KKK): Used for alternative investment strategies, LP-KKK interests can be issued as ledger-based securities, enabling tokenized access to private equity, real estate, and infrastructure fund products.

Each CISA fund type must appoint a FINMA-approved custodian bank that exercises independent oversight of fund operations. For tokenized fund products, the custodian bank must maintain digital asset custody capabilities, including: segregated wallet management for fund assets; multi-signature authorization for token transfers; and monitoring of on-chain fund operations to detect unauthorized transactions or compliance breaches.

Swiss DLT Trading Facility Regulatory Category

The DLT Act created a new category of financial market infrastructure — the DLT trading facility (DLT-TF) — authorized under the FMIA. DLT trading facilities can combine trading and post-trade functions (clearing, settlement, and custody) on a single DLT platform, which traditional market infrastructure regulation keeps strictly separated.

This integrated model has significant implications for tokenized ETF products. A DLT-TF can: list tokenized ETF shares for trading; execute trades through an automated matching engine; settle trades atomically through delivery-versus-payment on the distributed ledger; and maintain the securities register for tokenized ETF shares — all on a single platform. This integration eliminates the multi-party settlement chain (exchange → CCP → CSD → custodian) that traditional ETF settlement requires, potentially reducing settlement costs and counterparty risk.

SDX holds the only DLT-TF authorization issued by FINMA as of March 2026. Additional applications are under review, and FINMA has indicated willingness to authorize additional DLT-TFs that meet its requirements — creating the potential for competing DLT venues for tokenized fund products.

The tokenized ETF settlement infrastructure analysis examines how the Swiss DLT-TF model compares with settlement infrastructure approaches in the US (DTCC) and EU (Euroclear).

Swiss-EU Regulatory Relationship and Fund Distribution

Switzerland’s relationship with the EU fund regulatory framework has specific implications for tokenized fund products. Switzerland is not an EEA member and does not participate in the UCITS or AIFMD passporting frameworks. Swiss funds — including tokenized fund products — cannot be distributed across the EU under a single authorization.

For cross-border distribution of Swiss tokenized fund products into EU markets, fund sponsors must either: register the fund under each EU member state’s national private placement regime; establish a parallel EU-domiciled fund (typically in Luxembourg or Ireland) for EU distribution; or rely on reverse solicitation exemptions (which are narrowly defined under MiFID II and unlikely to support active distribution).

This distribution constraint means that Switzerland’s tokenized fund framework serves primarily: Swiss domestic investors; non-EU international investors (Asia-Pacific, Middle East, Latin America); and institutional investors in EU jurisdictions who access Swiss funds through professional investor exemptions.

Despite these distribution limitations, Switzerland’s comprehensive legal framework, FINMA’s practical regulatory approach, and SDX’s DLT infrastructure make it the gold standard for tokenized fund regulation. Other jurisdictions — including Hong Kong, Singapore, and Germany — have studied the Swiss DLT Act as a model for their own legislative development.

SDX Institutional Trading Volume and Market Development

SIX Digital Exchange (SDX) has achieved meaningful institutional trading volume since its FINMA authorization, processing CHF 3.8 billion in tokenized securities transactions through 2025. SDX’s tokenized bond issuance program — which includes digital bonds from the Swiss Confederation (government bonds), UBS, and Credit Suisse (prior to acquisition) — has established institutional credibility for DLT-based securities infrastructure. SDX’s extension to tokenized fund shares represents a natural evolution of its regulated marketplace capabilities.

SDX’s settlement architecture achieves atomic delivery-versus-payment using Swiss franc-denominated settlement in central bank money through a connection to the Swiss National Bank’s SIC payment system. This CBDC-equivalent settlement provides the highest credit quality available for tokenized securities transactions, distinguishing SDX from platforms that settle in commercial bank money or stablecoins. For tokenized fund products, SDX’s central bank money settlement eliminates the settlement credit risk that exists when fund creation and redemption settles through commercial bank deposits.

The Swiss National Bank’s Project Helvetia — testing wholesale CBDC issuance on SDX — further strengthens the settlement infrastructure for tokenized fund products. Project Helvetia’s Phase III demonstrated live settlement of tokenized securities against wholesale CBDC on SDX, providing operational evidence that central bank digital currency can serve as the settlement medium for institutional tokenized fund transactions.

Outlook for Swiss Tokenized Fund Market Growth

The Swiss tokenized fund market is expected to grow as institutional adoption increases and the DLT infrastructure matures. Key growth drivers include:

• SDX expansion: SDX’s growing list of tokenized securities — including bonds, structured products, and fund shares — creates a deepening liquidity ecosystem that attracts additional institutional issuers and qualified investors.
• Banking sector engagement: UBS, Credit Suisse (now part of UBS), Julius Baer, and Vontobel have each launched digital asset capabilities that include tokenized fund product development.
• Crypto Valley ecosystem: Switzerland’s Crypto Valley (the cluster of blockchain companies in Zug and Zurich) provides technology providers, smart contract auditors, and specialized service providers that support tokenized fund product development.
• Regulatory certainty premium: In the current global environment where regulatory uncertainty remains the single primary barrier to tokenized fund adoption, Switzerland’s legal certainty commands a premium that attracts fund sponsors willing to pay higher domiciliation costs for regulatory clarity.

The fund manager blockchain platform evaluation guide provides additional context for evaluating Swiss infrastructure options alongside alternatives in other jurisdictions.

Switzerland’s framework gains additional significance in the context of accelerating global tokenized fund adoption. The EU has authorized 53+ MiCA CASPs and extended its DLT Pilot Regime through December 2025 to broaden institutional participation, while the US market has generated 155 crypto ETP filings covering 35 tokens pending SEC review. In Asia-Pacific, Hong Kong’s ChinaAMC tokenized money market ETF reached $546.1 million as the first retail-accessible tokenized fund, and Singapore’s Project Guardian now encompasses over 40 financial institutions — including DBS, JPMorgan, UBS, and Standard Chartered — conducting institutional-grade tokenized fund pilots. Switzerland’s well-established DLT Act framework, SDX institutional infrastructure, and FINMA’s principles-based regulatory approach collectively position the jurisdiction to attract global fund sponsors seeking the comprehensive regulatory certainty that competing frameworks have not yet fully delivered.

FINMA publishes DLT Act guidance and licensing information at finma.ch.

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