Non-Fungible Tokens (NFTs)

Co-author of the Swiss Blockchain Federation Circular. Published in April 2023.

The Swiss Blockchain Federation circular on Non-Fungible Tokens (NFTs) provides a legal and regulatory classification of NFTs within the context of Swiss financial market law. NFTs are digital tokens on a blockchain that, unlike traditional cryptocurrencies, are non-fungible and are commonly used to represent unique digital or physical assets.

The document first explains the technical and conceptual foundations of NFTs, including their typical structure through smart contracts and the link between the token and the underlying digital or physical asset. Building on this, the circular analyses under which circumstances NFTs may fall under existing regulatory categories, such as financial instruments, securities rights, or other regulated assets.

A key focus lies on the legal qualification of NFTs on a case-by-case basis. Because NFTs can take many different forms, the circular recommends a differentiated assessment, particularly with regard to financial market regulation, anti-money laundering requirements, and potential classifications as collective investment schemes. It outlines the criteria relevant for regulatory assessment as well as potential risks and compliance obligations.

Furthermore, the document discusses practical use cases for NFTs and potential market structures, including applications in digital art, collectibles, digital identity, and the tokenization of real-world assets. At the same time, it highlights legal and operational challenges, such as rights related to the underlying content, custody, market transparency, and investor protection.

Overall, the circular serves as a guideline for market participants by structuring the legal framework and regulatory implications of NFTs in Switzerland, thereby contributing to legal certainty and the responsible development of the NFT ecosystem.

The full document can be accessed here:https://new.blockchainfederation.ch/wp-content/uploads/2024/04/Zirkular-2023_01-Non-Fungible-Tokens.pdf