The SIX Digital Assets Regulatory & Tax Service—Simplifying regulatory compliance

SIX recently unveiled its Digital Assets Regulatory & Tax Service, designed to simplify worldwide regulations and tax directives governing digital assets with the view to making regulatory compliance more straightforward for its clients. Jérôme Gfeller and Stefano Chierici discuss details of the offering, including use-cases and what sets it apart from similar services.

What was the premise and thinking behind SIX launching its Digital Assets Regulatory & Tax Service? Was it driven internally by the firm identifying a gap in the market or was it in response to clients’ needs and demands?

Jérôme Gfeller, senior product manager, SIX: The more we dealt with the subject of digital assets, the clearer it became that they are here to stay. The Digital Assets Regulatory & Tax Service was therefore driven internally. We knew there would be a need for digital assets-related data, and we wanted to be on the market early with an offering. Being a financial data provider, we feel the obligation to cover financial instrument data on-chain, as well as the asset class of crypto currencies. As we developed the product, we engaged with interested clients to exchange thoughts and collect requirements. This is continuous, as the product undergoes iterations twice a year.

The more we dealt with the subject of digital assets, the clearer it became that they are here to stay ... We knew there would be a need for digital assets-related data, and we wanted to be on the market early with an offering.

Jérôme Gfeller, SIX

What does the Digital Assets Regulatory & Tax Service entail from the client’s perspective—what do clients receive from SIX as part of the service? 

Stefano Chierici, senior product manager at SIX: We deliver a security master file focused on digital assets that covers worldwide regulations and tax directives. This approach helps us stay ahead of the market, as we are able to anticipate clients’ needs, although we retain the flexibility to quickly react to their specific requests and adapt the product and service where possible.

What are SIX clients struggling with right now with regard to their digital assets/crypto business and interests, and how is SIX, as a service provider and partner, helping them address those issues?

Jérôme Gfeller: The Digital Assets Regulatory & Tax Service is designed to cover multiple use-cases. The file offers great support for increasing clients’ operational efficiency, it helps in decision-making processes, and it ensures clients are compliant. Here a few highlights of the file:

• Full coverage of the Digital Token Identifier (DTI): For the Crypto-Asset Reporting Frame-work and other regulations, clients need to deliver the DTI—and not the International Securities Identification Number (ISIN)— to authorities. There is a one-to-many relationship between an ISIN and DTIs.
• Marking traditional financial instruments with a crypto exposure: In today’s world, many funds or structured products have exposure to crypto assets. The Digital Assets Regulatory & Tax Service identifies and displays those traditional financial instruments.
• Compliance: Understanding which regulation and tax directive is applicable to a particular instrument, in order to stay compliant.
• For crypto assets service providers: Being able to understand the taxonomy and put each of the digital assets offered to their clients into the right regulatory category is key to ensuring compliance with the applicable regulations.

The crypto/digital assets market is becoming increasingly crowded and competitive, especially when it comes to the service and data provider market. In which areas of the market does SIX lead?

Stefano Chierici: Several clients have told us that our coverage of the DTI is very good compared with the competition. We also feel our proposition is unique, in the sense that we bridge decentralized financial instruments and traditional financial instruments under a single taxonomy. Our coverage is also convincing in that we generally show all instruments that are of interest to financial institutions. We collaborate with strong contributors, such as the Digital Token Identifier Foundation or Coinbase, and we receive data from many marketplaces, allowing us to provide a high-quality dataset. At the same time, we analyse solutions with our colleagues in the funds space to identify digital assets constituents and underlying with a look-through approach.

Data ease-of-use, as well as accuracy and transparency, are often cited by firms as key differentiators, regardless of the data type or asset class. How does SIX ensure the data underpinning its Digital Assets Regulatory & Tax Service is easy for clients to consume, is transparent and is therefore fit for purpose?

Jérôme Gfeller: These were exactly the arguments for deciding to offer a market snapshot touching on digital assets as a flat-file service. A flat file is easy to map and integrate, and the taxonomy we offer is intuitive. As mentioned, we aim to work with contributors that are considered to be “golden sources”. 

What does SIX have on the horizon in terms of enhancements to its Digital Assets Regulatory & Tax Service?

Stefano Chierici: The Digital Assets Regulatory & Tax Service file undergoes two iterations per year, where we continuously improve the flat file. In those iterations, we aim to keep up with digital asset regulations and tax directives while providing the data points needed to stay compliant. With our release in the fourth quarter of this year, we will introduce a flag for the Genius Act—the recently introduced Guiding and Establishing National Innovation for US Stablecoins Act, which aims to create a regulatory framework for stablecoins—the Dubai Financial Services Authority regulation and the Basel Committee on Banking Supervision classification for crypto assets, as well as a Markets in Crypto-Assets Regulation “eligibility” flag, which has been requested by clients. The fee for the file is yearly and stays flat.

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