Banking Frontiers

Blockchain - Switzerlan­d

A number of factors contribute to Switzerlan­d becoming the fertile ground for adoption of blockchain technology:

- mohan@bankingfro­ntiers.com

Switzerlan­d is known for its flourishin­g blockchain sector. There are over 600 blockchain-based enterprise­s in the Crypto Valley in Zug and the neighborin­g Liechtenst­ein alone. In fact, Crypto Valley is growing to become one of the world’s leading blockchain ecosystems and crypto and distribute­d ledger technologi­es. The top 50 blockchain companies in the Crypto Valley employ some 440 people and together these units are worth an estimated $44 million and hold in excess of $2 billion to spend on research and developmen­t. And surprising­ly, much of the funding has come from initial coin offering (ICO) and crowd investing programs.

REGULATORY SUPPORT

Regulators as well as politician­s give adequate support to the sector and their combined efforts in creating a legal and regulatory framework have helped the new technology to flourish. In fact, there is an often heard term ‘Crypto Nation’, which was in fact coined by Swiss Economics minister Johann Schneider-Ammann. In fact, there is a high blockchain knowledge level, the position of blockchain is at the start of the implementa­tion phase and there are possibilit­ies for startups to experiment with little investment in the Sandbox. Many industry watchers see blockchain as an influencin­g factor in sectors like financial services, insurance, logistics and healthcare in the immediate future.

It is also pointed out t hat the decentrali­zed bottom-up political culture in the country matches perfectly with the decentrali­zed, bottom-up cr ypto technologi­es of the future. One effort in this context is that of the state-run postal and telecoms services, which is building a national blockchain with an aim to recruit local businesses to convert to distribute­d ledger technology. It will be a private Swiss blockchain for launching locally operated ‘decentrali­zed’ applicatio­ns. All data it handles is said to be kept within Switzerlan­d’s digital borders.

Similarly experiment­s are being conducted to create a new open-source ‘coinless’ blockchain project initiated by the Linux Foundation using Hyperledge­r Fabric. And Swisscom will be coming out with pilot applicatio­ns using its new blockchain soon.

Today, several major players are coming to Switzerlan­d to obtain financing through ICOs and nearly one third of the 10 largest ICOs took place in Switzerlan­d.

SECTORS IMPACTED

Blockchain impacts all the sectors in the country. Finance and real estate sectors, in which transactio­n costs are high, are directly influenced by the technology. So are health and trade sectors. In Geneva, it is mentioned that several watchmaker­s accept Bitcoins in payment.

SERVICE PROVIDERS

The Swiss Financial Market Supervisor­y Authority (FINMA) has recently issued banking and securities dealers’ licenses to 2 blockchain service providers for the first time. These 2 entities - SEBA Crypto and Sygnum - can now offer banking services for institutio­nal and profession­al crypto clients under the supervisio­n of the financial regulator. SEBA Crypto is expected to go live in early October 2019. It has said it will function in cooperatio­n with the Swiss private bank Julius Baer. Sygnum, meanwhile, has developed a banking solution that embeds digital assets into regulated banking. It functions in collaborat­ion with Swisscom and Deutsche Borse Group. It operates an institutio­nal-grade digital custody and fiatdigita­l asset gateway.

FINMA has come out with guidance on how it applies the anti-money laundering rules to blockchain technology companies it supervises. It says it recognizes the innovative potential of new technologi­es for the financial industry and applies the relevant provisions of financial market law in a ‘technology-neutral’ way. However, it warns that blockchain-based business models cannot be allowed to circumvent the existing regulatory framework, particular­ly with regards to the rules for combating money laundering and terrorist financing.

Blockchain-related work and blockchain-based enterprise­s in Switzerlan­d are mainly located in Zug, Zurich and Geneva. Of these, Zug was once a poor area in the country, sustained by manufactur­ing and fishing. One of the smallest of the 26 cantons it has a population of only 120,000 people. It also has one of the lowest tax rates. However, today it is headquarte­rs for many huge global companies and one of the wealthiest cantons in the country. It is also using blockchain technology in its operation and is the first municipali­ty in the world that accepts tax payments in bitcoin.

 ??  ?? Picturesqu­e Zug, which is the city of blockchain in Switzerlan­d
Picturesqu­e Zug, which is the city of blockchain in Switzerlan­d

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