Apart from the fact that Switzerland has been leading the pack in terms of innovations development for seven years, the country has managed to become a recognized international center of blockchain and crypto projects.
The Swiss Blockchain Ecosystem
The canton of Zug has become a platform with the most developed infrastructure for the localization and realization of blockchain projects. Here you will find banks working with both fiat money and cryptocurrencies, HSLU-I university that trains blockchain specialists, headquarters of such blockchain startups as Ethereum, Monetas, Lykke. In early 2017, the head of Tezos Foundation Johann Gevers initiated the establishment of the non-profit Crypto Valley Association aimed to support and promote blockchain-based projects.
Pilot blockchain projects started to emerge in Zug in 2014. Launched campaigns included those for referendums, electronic identification of citizens, acceptance of utility bill payments, transport. The whole population of Zug, i.e. 30,000 people, have their own electronic IDs.
Similar projects are launched in other cantons such as Schaffhausen and Uri. At the beginning of 2017, startup Procivis announced the launch of the pilot app store for electronic government based on blockchain. The app will give the citizens of Switzerland an opportunity to use the whole range of e-Government services, for instance, to file tax declarations, manage cadastral registers, vote, and perform digital identification.
The financial market also experiments with the technology. Swisscom telecom firm, SIX Swiss Exchange, Zurcher Kantonalbank have established a blockchain consortium intended to arrange the over-the-counter securities trading. In other words, parties close the deal directly, not through the exchange.
The largest Swiss financial infrastructure provider SIX Securities has launched an experimental blockchain platform for the securities market.
The technology’s potential covers many industries, including energetics, telecommunications, and pharmaceutics. According to PwC’s report, 75% of Swiss companies are planning to implement the blockchain technology over the next three years.
A Stake on Cryptocurrencies
Cryptocurrencies are gradually integrated in the Swiss real economy. The country already has over 100 companies with activities related to virtual currencies, including CurrenSky, Klik & Pay, Paymill, Equippo AG, René Hüsler.
Cryptocurrency companies start obtaining licenses. The first Directly Subordinated Financial Intermediary (DSFI) license has been granted to Moving Media GmbH, which owns the Payment21 brand.
Furthermore, the private financial institution Falcon Private Bank has become the first to offer its customers direct services of cryptocurrency asset management. Customers of the bank are able to buy and store Bitcoin, Ether, Litecoin, and Bitcoin Cash.
According to the co-founder of the cryptocurrency exchange Bity Alexis Roussel, until recently mainly individuals from financial institutions were buying virtual currencies. «They were working on crypto projects at their companies and wanted to see how it worked in practice,» Roussel noted.
Like in most countries of the world, the issue of the legal status of cryptocurrencies remains unsettled. For the first time the question appeared on the agenda in 2014. However, back then the Swiss government decided that virtual money had almost no influence on the economy.
Currently, Switzerland's Federal Council wants to define the status of cryptocurrencies. The government is already drafting a corresponding bill.
Despite the fact that the government has not taken a firm position on the digital currency yet, it is already deployed in the real economy, primarily Bitcoin.
For instance, the municipality of Zug has become the first state administrative body to accept Bitcoin payments.
Starting from January of 2018, the municipality of Chiasso will accept tax payments in Bitcoin. To start with, the sum of payments will be limited to 250 CHF.
Even rents can be paid in Bitcoin now. Such a possibility is offered by the Swiss company VisionApartments.
The Lucerne University of Applied Sciences and Arts is going to accept tuition fees in Bitcoin. The payments will be converted into Swiss Francs weekly or daily when they reach the mark of 10,000 CHF. A 1% payment fee will be applied.
Switzerland as a Main ICO Hub
According to the data of Atomico venture firm, Swiss projects have raised $ 828 million in ICOs since 2014, which accounts for 47% of all funds invested in cryptocurrencies in Europe. Tezos startup raised a record-high sum of $ 238 million in investments. Bancor managed to raise $ 156 m, the DAO — $ 142 m, Status — $ 95 m.
ICOs are still not regulated. The Swiss Financial Market Supervisory Authority (FINMA) has not made any official announcements regarding the elaboration of regulations or the protection of investors.
Currently, the FINMA handles ICOs depending on the token functionality.
For instance, if tokens are qualified as derivatives, a banking license will be required for securities trading. ICOs that have obligations to their participants will also need a banking license to accept public contributions.
Cryptocurrency operations also fall under the general requirements of the Swiss anti-money laundering laws. Therefore, if an ICO vendor needs to issue a payment instrument in order to create a token, he or she has to factor in those requirements.
In such a way, different requirements of the current Swiss legislation can be applied to ICOs, including provisions of anti-money laundering and countering the financing of terrorism (AML/CFT) legislation, norms of banking laws, security trading, and collective investment mechanisms.
The above-mentioned non-profit Crypto Valley Association (CVA) is developing a special ICO Code of Conduct. Its provisions are expected to bring clarity and certainty in the conduct of ICOs.
«We believe that token sales represent an exciting, sound and innovative approach to raising investment capital. Therefore, we believe Switzerland should support this trend by developing clear, comprehensible, yet flexible regulation that clarifies the legal status of ICOs and the tokens generated,» the chairman of CVA Oliver Bussmann said.
Regulatory Sandbox
The further progress of blockchain, integration of cryptocurrencies and ICOs largely depends on the regulatory aspect. Legislation of Switzerland related to innovative technologies undergoes the reformation stage, so the digital sector is mostly regulated by general norms.
Currently, the government is considering the possibility of introducing several mitigation measures in 2018. Among other things, it is planned to simplify the acquisition of the license that will allow accepting deposits from individuals for a total amount of 100 million francs. Furthermore, requirements to insurance capital will be softened to comprise 5% of the deposit portfolio, but not less than 300 thousand francs.
Fintech startups that raise not more than 1 million francs will be allowed to operate without a banking license, which will speed up the establishment of new companies.
Crowdfunding platforms will also experience changes, being able to collect money from investors within two months. According to current laws, Swiss financial firms may store their customers' funds up to seven days. In case of a longer period, companies should obtain a banking license. It is planned to expand the storage period up to 60 days.
You will find more information about the prospects of blockchain technology, cryptocurrencies, and ICOs in Switzerland, the latest changes in legislation, and advanced technologies at Blockchain & Bitcoin Conference in Geneva on February 21, 2018.
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