Flourishing ICO Market is turning the Alpine Nation into a Crypto Nation
The country once synonymous with anonymous banking is now positioned to become the world leader in unidentifiable currency.
Switzerland has quickly become a global hub for cryptocurrencies and the blockchain technology they are built on, with investors flocking to the wealthy European nation to get in on the virtual action.
The country's largest city,
Zurich, set up its first
Bitcoin ATM four years ago, while the
Swiss national rail company has since 2016 provided the possibility of purchasing the virtual currency at over 1,000 distributors across the country. And just a half-hour drive from Zurich is the small town of
Zug, which thanks to a business-friendly taxation scheme has long been a global economic centre – home to tens of thousands of companies, including large investment firms, pharmaceutical companies and commodity trading groups.
But for the past few years, a new category of company has descended on the town, which in high-tech circles has been dubbed ‘Crypto Valley’. That’s the name of an association set up in Zug in 2013 with the explicit aim of drawing start-ups dabbling in virtual currency technologies, creation, and trading to the town.
The push worked. According to Swiss financial watchdog
Finma, last year, out of the world’s six biggest
Initial Coin Offerings (ICO’s)
four took place in Switzerland,.
At press time, Zug was home to some 200 blockchain companies, including the foundation behind
Ethereum – the second largest cryptocurrency after Bitcoin. Since 2016, the town has also accepted bitcoin payments for council services. The southern Italian-speaking Swiss town of
Chiasso, which is attempting to compete with Zug as a ‘CryptoPolis’, has decided to even accept Bitcoin payments for some taxes.
Fear of money laundering
Faced with a ‘sharp increase’ in the number of ICO’s, Finma last month published guidelines detailing the regulatory requirements for such fundraising schemes.
According to the regulator:
“Creating transparency at this time is important given the dynamic market and the high level of demand.”
It warned that it was particularly important to protect against money laundering since the risk was high in “a decentralised blockchain-based system, in which assets can be transferred anonymously and without any regulated intermediaries.”
Switzerland's famous banking sector has been divided in the face of the flood of new virtual currencies on the markets. Some Swiss banks were among the first to dive into the cryptocurrency pool.
Vontobel, for instance, created the first structured Bitcoin product – a tracker that allows for investment in shifting values of the virtual currency without purchasing the coins directly.
Falcon Private Bank has meanwhile offered asset management services for a range of cryptocurrencies – including Bitcoin and Ethereum – while financial and trading services group
Swissquote offers trading in five virtual currencies.
However, Switzerland's two largest banks – global financial powerhouses
UBS and
Credit Suisse – have so far kept their distance from the crypto boom.
In an interview with the
NZZ am Sonntag weekly late last year, UBS chairman
Axel Weber – a former head of the German central bank – warned of significant ‘design flaws’ in cryptocurrencies like Bitcoin. UBS has decided to warn clients against investing in the virtual currency, he said, because the bank does “not consider it valuable and not sustainable.”
On Wednesday, as first reported by the Swiss weekly
Handelszeitung, Bitfinex was in talks with Swiss authorities looking to move its entire operations from Hong Kong to Switzerland. Bitfinex is the world’s fifth-largest cryptocurrency exchange by 24-hour trading volume.