The crypto-phenomenon is a global one. Public blockchain networks such as bitcoin or ethereum are not controlled by a state or a company. Rather, they connect people from different walks-of-life across national borders. Yet, despite all this decentralization, this new world, where the primacy of the digital rules, needs points of contact with the physical world. In other words, even blockchain needs a home.
Outgoing Federal Councillor Johann Schneider-Ammann offered his hand to the crypto community when he proclaimed his desire for the establishing of the “crypto nation of Switzerland” at the end of 2017. He urged industries and the government to make the country one of the world’s most important crypto locations. The proclamation of the crypto-nation from the highest levels in government is considered a clever move amongst visionaries and blockchain enthusiasts. As a result of this, not even a year later, Switzerland has a wide range of initiatives aimed at making crypto topics even better known. However, a healthy dose of humility would go far for politicians, who’se support is necessary if regulatory issues are to be resolved. After all, politicians will be the recipiens of rewards that they have not help sow.
From below, not from above
The fact that Switzerland today has a considerable crypto scene is mainly due to the great commitment of a number of private individuals. In the beginning, there were a few computer freaks and anarcholiberals who were interested in this new phenomenon for technical or philosophical reasons. In the early days it was synonymous with bitcoin, as there were no other crypto currencies. It wasn’t until about five years after bitcoin was created that the first alternative projects appeared. It is therefore not surprising that the first local crypto start-up was christened Bitcoin Suisse AG, who helped develop the first crypto and fintech association, which is aptly named the Bitcoin Association Switzerland (BAS). Bitcoin Suisse was founded in 2013 by Niklas Nikolajsen, a Danish native and the BAS was founded by the economist and computer scientist Luzius Meisser. Together with Alexis Roussel of Bity, a company that can be likend to Bitcoin Suisse AG, which also became a crypto-financial service provider and assisted in pioneering the movement. Today, Bitcoin Suisse AG employs 65 people and has already managed to poach some heavyweights from the traditional banking world.
An important milestone in the development of the Swiss crypto scene was the decision of the Ethereum Foundation to establish itself in Zug. In this context, the mediation work undertaken by the consulting firm MME, under the leadership of Luka Müller, deserves a special mention. Ethereum had a strong pull effect, more and more clever minds sought proximity to the ethereum community and used the ethereum blockchain as a platform. At the same time, they benefited from networks that were established in Zug and other cantons.
Service providers willing to talk
The fact that ethereum chose Switzerland and not Singapore was due to the fact that Switzerland, with its federal structure, best reflected the idea of decentralization that underlies the crypto-movement. The communication channels with the authorities is more direct in Switzerland than in a more centrally managed country; and the government is also open to discussion. Among crypto enthusiasts from all over the world, the cantonal authorities are therefore regarded as cooperative service providers, with start-ups being partners, not applicants.
The flexible Swiss legal system allows existing, abstractly formulated laws to be applied to the new challenges with little effort. Questions regarding tax and other financial laws can be answered more efficiently and in a more innovation-friendly manner in Switzerland than in the EU. In the view of many crypto advocates, a significant improvement was brought about by the introduction of the Financial Market Infrastructure Act in 2016, which brought the Swiss legal apparatus into line with that of the European Union. Nonetheless, according to the community, Swiss legislators and the regulator Finma, would still show great skill in handling the new technology and its applications.
Here to stay
Bitcoin and other crypto currencies have become famous since the end of 2017. The notion that they will soon disappear again is hardly imaginable; not least in Switzerland. This has led to many a career change; with prominent bankers increasingly turning their backs on the traditional financial world to work for a blockchain start-up or to establish one themselves. Examples of such a movement of high-profile individuals from the traditional Arthur Vayloyan, a former banker at Credit Suisse and most recently at Falcon Private Bank, joined Bitcoin Suisse AG as the new CEO in November 2017.
Additionally, Andreas Amschwand from the Julius Baer Group also opted to move into the new industry, assuming a position on the Board of Directors at the newly founded crypto-bank Seba. Lastly, the former head of the Swiss Stock Exchange, Christian Katz, is also flirting with the crypto world. He is Chairman of the Board of the new Swiss Crypto Exchange (SCX).
In September this year, the crypto ecosystem in Switzerland and Liechtenstein already numbered over 600 companies with a total of 3000 jobs. Five of these crypto projects, which originated in Switzerland or are still rooted here, including Unicorns such as, Bitmain, Cardano, Dfinity, Ethereum and Xapo; which are all valued at one billion dollars or more. For a long time Zug, now known worldwide as Crypto Valley, seemed to be the heart of the Swiss crypto scene. In particular, the Crypto Valley Labs, which opened in 2017, was able to further increase its international appeal. Furthermore, just recently an incubator called Crypto Valley Venture Capital (CV VC) was founded by Zug-based Blockchain consulting firm Lakeside Partners. Over the next five years, CV VC will be used to invest between 50 and 100 million dollars in up-and-coming crypto start-ups.
But that is not all. In April this year, Trust Square, the first Zurich Blockchain hub, moved into its offices on Bahnhofstrasse. Right next to the Swiss National Bank and not far from Paradeplatz where some further 40 blockchain start-ups are based; comprising of one-man projects to young companies with over 50 employees. The Zurich initiative is not only attracting interest from start-ups; the Lord Mayor of London and a delegation from the Mayor of Seoul have also visited. To bring the blockchain issue even more into the public eye, Trust Square is striving for intensive cooperation with local politicians.
Banks, the apple of discord
There is also close cooperation throughout the universities. Research on the Blockchain is carried out at ETH Zurich, the University of Zurich, the University of Basel and the University of Applied Sciences Rapperswil. The University of Basel deserves special mention, where blockchain lectures have been offered for several years within the framework of the “Center for Innovative Finance” research unit. The focus is on the interdisciplinary nature of economics, computer science and cryptography. In the meantime, the six blockchain courses have been attended by almost 700 students, and 126 course certificates have been issued for the ethereum blockchain.
But not everything is. golden, there is one topic in particular on which there is disagreement, the role of the banks. Some see the banks as divisive entities, as they would deny many crypto start-ups access to a bank account. Others consider the outcry to be exaggerated claiming that there are enough examples of reputable blockchain companies that have been able to get a bank account without problems.
As the blockchain sector becomes more professional, this debate is likely to become unnecessary in the near future. In general, crypto start-ups may soon no longer be dependent on traditional banks. Crypto Finance AG, for example, was the first crypto company to receive approval from Finma to distribute crypto funds to qualified investors. Who knows, perhaps the first player in the crypto scene will soon grab a banking license.
* Originally published in German at CVJ.ch
