Blockchain

Switzerland Wants To Be The World Capital of Cryptocurrency, Blockchain and ICOs

30/04/2018

Sunday, April 29, 2018
3:28 AM / By Brian Blackstone WSJ

Four of the 10 biggest initial coin
offerings last year were in Switzerland, more than any other country

When 24-year-old Ian Worrall launched his crypto-investment startup
MyBit last year, he chose this Swiss lakeside city. It was an odd fit: the
no-holds-barred corner of the financial markets meeting button-down
Switzerland.

Yet this nation, as closely tied to its ultrasafe Swiss franc as it
is to the Alps, is entranced by volatile digital currencies. Buildings in
Zug and in Zurich, Switzerland’s financial center, are blossoming into
crypto-finance hubs.

Four of the 10 biggest initial coin offerings last year were
in Switzerland, according to PwC, more than any other country.

The hope is the country’s banking prowess, low taxes, elite universities
and the Swiss brand itself will do for Switzerland what Silicon Valley did for
the U.S.

Efforts to expand the so-called Crypto Valley into what Switzerland’s
economics minister has called Crypto Nation have seen some success and may
offset the country’s shrinking banking sector.

The number of banks here has fallen 20% in the past decade, according to
the Swiss Bankers Association.

Switzerland “is the best from a tax, legal and operational standpoint,”
Mr. Worrall said from the MyBit headquarters in a startup hub called Crypto
Valley Labs, where the “California Republic” state flag hangs in his office.

MyBit is an investment platform to fund Internet of Things devices like
self-driving automobiles. It raised the equivalent of some $3 million in an
initial coin offering last summer.

The space once housed an energy-technology company. There’s a circus
school next door.

The number of companies at Crypto Valley Labs and another location
jumped from 15 early last year to over 100, said Mathias Ruch, managing partner
at Lakeside Partners, which developed the site. “I’m signing contracts on a
daily basis,” he said.

The canton of Zug, population around 120,000, has emerged as the heart
of Switzerland’s Crypto Valley. Its population grew at the fastest rate of all
Swiss cantons in 2017, and its jobless rate is 2.3%, below Switzerland’s 2.9%
average and down 0.2 percentage points from a year ago. Its corporate tax rate
is 14.6%.

Matthias Michel, Zug’s economics minister, said Crypto Valley wasn’t a
grand plan. Rather, it began five years ago when pioneers of blockchain
platforms like Monetas put down roots in Zug, attracted by the
business-friendly environment. Others followed, and an ecosystem developed.

In the process, Zug became a pilgrimage destination for global crypto
devotees, complete with guided tours. There’s a “Bitcoin accepted here” sign at
city hall.

“You cannot copy and paste [what Zug has done], it’s a systematic
approach which makes it strong,” said Mr. Michel.

Recently, officials from Finma, the Swiss financial regulator, met
industry representatives at a packed conference here. The meeting showcased another
Swiss advantage—nimble regulators, or as Mr. Worrall described the approach:
“Do your best, and if you mess up, we’ll work with you.”

While
Finma is receptive to cryptocurrencies, the Swiss National Bank is
skeptical and has warned of the risks associated with them. Executives from
large banks echo those worries.

“From
our standpoint, until you are able to trace all of these transactions and
subject them to strict rules on anti-money laundering, this is a huge risk,”
said UBS Chief Executive
Sergio Ermotti.

There
are other drawbacks for Switzerland. Despite a skilled workforce, the country
lacks a startup culture: There is a greater stigma attached to failing at a new
business in Switzerland than there is in the U.S. High living costs will make
it hard to scale up. If Mr. Worrall expands, it will probably be in Berlin.

The
biggest fear, though, isn’t the central bank or living costs, industry
participants say, but rather the potential to run afoul of U.S. regulators.

Switzerland
has spent years distancing itself from a reputation as a shady-money haven.
Banks have spent billions of dollars settling damaging charges from U.S.
authorities related to tax evasion and mortgage-backed securities. Crypto
startups say it’s hard to open a business bank account.

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