> For the complete documentation index, see [llms.txt](https://docs.obligate.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.obligate.com/legal/legal-and-regulatory-framework.md). # Legal & Regulatory Framework Enabling standardized & enforceable debt securities. On public permissionless blockchains. **Disclaimer:** The comments below are for general information purposes only. Please make sure you have sufficient legal advice before issuing or investing in an eNote or eTracker. ## Tokenization Framework ### **What are eNotes?** Obligate AG, the company behind the Obligate platform, structures electronic debt and investment instruments. The term “**eNote**”, trademarked by Obligate AG, serves as an umbrella term for its debt instruments. Historically, Obligate has also structured electronic promissory notes under Delaware law (UETA) and Singapore law (ETA). On the Obligate platform, instruments are issued as tokenized bonds and notes in the form of ledger-based securities under Swiss law (art. 973d et seq. Swiss Code of Obligations, CO). These provisions entered into force in 2021 as part of the "Swiss DLT Act" (Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology). **The Swiss tokenization framework forms one of the most advanced legal frameworks for tokenized securities.** They cover the valid issuance of all types of instruments, requirements for transfers, pledges, and usufruct, potential liability, and the treatment of the instruments in insolvency proceedings (segregation). Issuers may be Swiss or foreign entities (including securitization vehicles and segregated-portfolio structures), as long as the tokenization of the instruments remains governed by Swiss law. In addition to eNotes (debt instruments), the platform supports "**eTrackers**", structured debt instruments that follow the same ledger-based securities framework. ### **How is an eNote created and what does it entail?** A ledger-based security is formed by an agreement between the parties ("Registration Agreement"). The respective rights are registered in a securities ledger under art. 973d para. 2 CO and may only be asserted and transferred via that ledger. It is therefore a negotiable instrument *sui generis*. Any transferable claim or membership right can be structured as a ledger-based security. For example, this covers bonds and notes, structured debt, and equity. ### **Where are eNotes recorded?** The law sets requirements for the securities ledger, which must be met for the instruments to be valid. Obligate uses **Ethereum, Polygon, Base, Solana and other blockchains** as securities ledger for its issuances. In general, most public permissionless blockchains can qualify. Together with the issuance and settlement smart contracts provided by Obligate, the ledger fulfills the following requirements of art. 973d para. 2 CO: * It uses technological processes that give the creditors (i.e., the investors), but not the obligor (i.e., the issuer), direct power of disposal over their rights. * Its integrity is secured by adequate technical and organizational measures, such as joint management by several independent participants, to protect it from unauthorized modification. * The content of the rights, the functioning of the ledger, and the Registration Agreement are recorded in the ledger or in linked accompanying data. * Creditors can view relevant information and ledger entries and check the integrity of the ledger contents relating to themselves without intervention by a third party. ### **Who is entitled through holding an eNote?** An eNote works like a bearer instrument. The obligor is entitled and obliged to perform only to the creditor indicated in the securities ledger, subject to appropriate modification of the ledger. In simple terms, the verified person holding the eNote and registered on-chain gets paid. In addition, the settlement smart contract technically withholds payment of the face value until Obligate has successfully identified the last holder. ## Enforcement Framework ### Governing law The principle of party autonomy is firmly established within the Swiss private international law framework, permitting foreign entities to designate Swiss substantive law as the governing regime for their contractual arrangements and the issuance of debt securities. Under their laws, **foreign issuers are generally permitted to use ledger-based securities** pursuant to art. 973d et seq. CO as a legally valid form of creation, issuance, and transfer of rights as well as the documentation of these processes. If the issuer of an eNote is not a Swiss issuer (or if the relevant instrument is governed by a law other than Swiss law), the terms must specifically declare Swiss law as governing for the tokenization process and form of securities. In addition, parties may structure a transaction so that the terms and conditions of the underlying instrument, or other aspects of the transaction, are governed by one law (e.g., Luxembourg or English law), while the token representing or embodying the relevant rights is issued and transferred under Swiss law, thus still taking advantage of Switzerland’s legal innovation around digital debt securities. ### Arbitration All parties to an eNote are exclusively bound by an arbitration agreement that subjects all eNote-related disputes to arbitration in Switzerland. If a dispute is not settled amicably, a party may seek a decision from an arbitral tribunal seated in Switzerland. The resulting award is enforceable under the [New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC)](https://www.newyorkconvention.org/english). It can be presented to the competent court in the relevant country, which must grant enforcement without reviewing the merits, subject only to the limited grounds for refusal in the NYC. **More than 170 states** are party to the NYC, which has an excellent record of adherence by its member states and their courts. Arbitration offers business expertise, confidentiality, speed, and rapid finality. Swiss arbitration law and institutional rules are regarded as a gold standard in international arbitration and are a dispute resolution framework of choice for companies. ## Regulatory Framework ### **Qualification, KYC & verified users** eNotes and eTrackers qualify as securities in most jurisdictions. The Obligate platform is open only to **qualified investors** within the meaning of the law applicable to them and, where applicable, the issuer's own definition of eligible investors. To use the platform, parties must pass KYC/KYB and customer due diligence under Swiss anti-money laundering regulations (AML/CFT) and sanctions laws. Certain countries and nationals are excluded from using the platform and/or purchasing eNotes or asserting rights associated with them. Following completion of the onboarding, a user receives login credentials; they are now ready to create an issuance program or invest in one of the issuances that is in the live book building phase on the platform. Obligate follows a “bring your own wallet” approach and supports institutional-grade wallets such as **Fireblocks and MetaMask** as well as the open-source standard "**WalletConnect**". Obligate never has direct or indirect control over eNote instruments or related on-chain payments. To claim payment of the face value at maturity, a holder must be a verified user. Unverified holders must first complete KYC/KYB before they are entitled to payment, and parties that do not pass KYC have no claim against the issuer. This ensures that issuers only make payments to known holders. ### **Obligate’s regulatory status** Obligate AG is a **financial intermediary** according to article 2 paragraph 3 of the Swiss Anti-Money Laundering Act (AMLA) and a member of the Financial Services Standards Association (VQF), an Anti-Money Laundering Self-Regulatory Organization (SRO), regulated and supervised by the Swiss Financial Market Supervisory Authority (FINMA). Therefore, Obligate AG is authorized to provide financial intermediation services, as defined in the AMLA, to its onboarded customers. Under the Swiss Financial Services Act (FINSA), certain employees of Obligate AG may be registered as "client advisors", authorizing the company to deliver specific **financial services** through them. Obligate AG does not offer investment advisory or portfolio management services to its customers, nor does it provide any financial services to retail clients as defined under FINSA. Furthermore, Obligate AG does not conduct appropriateness and suitability checks as provided for in the FINSA.