Talk with Prof. Cornelia Stengel, Attorney at Law for Financial Market and Data Protection and Partner at Kellerhals Carrard

The Swiss National Bank has just launched the pilot operation of token money for interbank transactions (wCBDC). What are the biggest legal challenges for the introduction of private token money in Switzerland?

In terms of civil law, the main issue is probably the clarification of the legal form and qualification. In particular, a distinction must be drawn between two different transfer systems. On the one hand, there is the traditional instruction system with intermediaries, in which, for example, the payer instructs their bank to make an entry in favor of the beneficiary. On the other hand, there is the direct transfer of digital assets between the payer and the beneficiary, made possible by the distributed ledger technology (DLT) legislation.

Closely related to this are questions of financial market law, such as whether token money can or should be qualified as securities. In addition, questions of monetary law must be answered, such as the possible status of legal tender, access, or the functions of private token money. Finally, questions of personal data protection and informational self-determination must be examined early in the conception phase. These, in turn, are partly related to financial market legislation, in particular legislation against money laundering and terrorist financing.

How would the real economy benefit from the introduction of token money?

Token money could circulate quickly and directly between participating businesses or their customers. This could reduce transaction costs and increase efficiency. Future business models will increasingly be based on the purchase of services, some of which will be triggered directly by the machines used (Internet of Things) and paid for with very small amounts. Especially in the case of digital services such as music or video streaming, token money can solve challenges such as micro-denomination, transaction costs and the complexity of invoicing and payment management.

What are the advantages of token money for securities trading?
With its DLT legislation, Switzerland has laid the foundation for the direct and efficient trading of all types of financial assets as so-called digital assets. However, the cash leg, i.e., the token money for the payment of these assets in the same transaction, is still missing. In this context, it is also worth thinking about the execution of corporate actions, such as the payment of dividends on shares, which could be fully automated and in
real time – i.e., not two days apart, as is the case today. Ultimately, the introduction of token money is a question of infrastructure and Switzerland’s national sovereignty in payment traffic.