Switzerland at epicentre of cryptocurrency revolution

March 29, 2018

Switzerland has become a global hub for cryptocurrencies and the blockchain technology they are built on, with investors flocking to the wealthy Alpine nation to get in on the virtual action.

The country's largest city, Zurich, set up its first ATM four years ago, while the Swiss national rail company has since 2016 provided the possibility of purchasing the at over 1,000 distributors across the country.

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 hub and is 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 is the name of an association set up in Zug in 2013 with the explicit aim of drawing startups dabbling in virtual technologies, creation and trading to the town.

The push worked. Out of the world's six biggest Initial Coin Offerings (ICOs)—an unregulated means to raise funds for new cryptocurrency ventures—last year, four took place in Switzerland, according to Swiss financial watchdog Finma.

Blockchain technology allows for the development of peer-to-peer payment systems. It runs by recording transactions as "blocks" that are updated in real time on a digitised ledger that can be read from anywhere and does not have a central record keeper.

Zug is currently home to some 200 blockchain companies including the foundation behind ethereum, the second largest cryptocurrency after bitcoin.

The town has also since 2016 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 meanwhile decided to accept bitcoin payments for some taxes.

Money laundering fears

Faced with a "sharp increase" in the number of ICOs, Finma last month published guidelines detailing the regulatory requirements for such fundraising schemes.

"Creating transparency at this time is important given the dynamic market and the high level of demand," the regulator said.

It warned that it was in particular important to protect against , 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 which 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.

Switzerland's two largest banks UBS and Credit Suisse have however 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".

Explore further: Largest Nordic bank Nordea bans employees' bitcoin trade

Related Stories

Britain urges global regulation of bitcoin

January 25, 2018

The British government called Thursday for global regulation of controversial virtual currency bitcoin, adding that the G20 would address the topic in March.

Twitter bans crytocurrency ads on fraud fears

March 26, 2018

Twitter on Monday announced a ban on ads for initial offerings of cryptocurrency or sales of virtual currency tokens, sending the value of bitcoin diving below $8,000.

Central banker takes stab at bitcoin 'bubble'

February 6, 2018

The head of the Bank of International Settlements, the central bank for central banks, on Tuesday lambasted bitcoin as a speculative bubble and said authorities need to be ready to protect public trust in the financial system.

Recommended for you

How social networking sites may discriminate against women

April 20, 2018

Social media and the sharing economy have created new opportunities by leveraging online networks to build trust and remove marketplace barriers. But a growing body of research suggests that old gender and racial biases persist, ...

Virtually modelling the human brain in a computer

April 19, 2018

Neurons that remain active even after the triggering stimulus has been silenced form the basis of short-term memory. The brain uses rhythmically active neurons to combine larger groups of neurons into functional units. Until ...

'Poker face' stripped away by new-age tech

April 14, 2018

Dolby Laboratories chief scientist Poppy Crum tells of a fast-coming time when technology will see right through people no matter how hard they try to hide their feelings.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.