For decades, Switzerland has been the go-to spot to store large amounts of money, thanks to its favorable banking system. Not satisfied with just being the banking capital of the world, the country has its sights set on being the blockchain capital of the world. The country has been at the forefront of the financial market for decades, successfully resisting the influence of foreign agencies, such as the IRS, since 1934. Recently, however, the United States has started to fine Swiss banks that do business with American citizens accused of tax evasion, leaving the financial market looking for other ways to expand. This is where their newfound efforts to attract blockchain and cryptocurrency start-ups come into play.
Blockchain Entrepreneurs are Setting Up Shop in Switzerland
Finma, Switzerland’s financial regulatory body, has been approaching blockchain and cryptocurrency start-ups, explaining the benefits of setting up shop in the country. Last year, four of the 10 biggest initial coin offerings were based in Switzerland for this reason. Ian Worrall, CEO of MyBit, explained that the biggest reason was the relaxed attitude by regulators, who have indicated an eagerness to work with blockchain start-ups. Worrall quoted one regulator as saying, “do your best, and if you mess it up, we can work with you.” Blockchain Valley Ventures, TrustSquare, Hive Power, and WindingTree are the four top companies that have opted to make Switzerland home.
Benefits of Blockchain-Friendly Regulatory Framework
The heart of the Swiss blockchain explosion is a town called Zug, consisting of about 120,000 people. Zug’s low corporate tax rate of 14.6 percent is a major attraction for blockchain start-ups, including Ethereum. Zug was also the site of the world’s first Bitcoin ATM, making it clear that the city is perfect for crypto-companies.
In addition to low tax rates, Zug is also home to many blockchain-friendly regulations. These include a clear set of rules established for companies, removing a lot of the murky grey area that exists in other countries, making it much easier for investors and start-ups alike to make business decisions. All enacted legislation is designed to help the crypto-industry, and the technology behind it, thrive. This balance between innovation, accountability, and security is what the Swiss financial system is known for, so it is no surprise that they are leading the way in this respect.
Advantages of Swiss Privacy Laws
Another huge advantage Switzerland has over other countries is the way it treats cryptocurrency. Instead of being treated as a security, they are considered assets. As a result, cryptocurrency companies, and blockchains start-ups by extension do not require any special approval or license to begin operating. This is a huge departure from other countries, like the United States, where every aspect of cryptocurrency is increasingly under scrutiny.
Some Swiss banks are nervous about dealing with cryptocurrency, citing strong anti-money laundering legislation enacted in the United States and the United Kingdom. Despite this, there are still five or so banks that are eager to work with start-ups and other crypto-companies. These banks take advantage of the privacy laws surrounding finance in the country. Switzerland is not bound by the same so-called “Know Your Customer” rules that other countries follow, making it much easier to set up an account and start doing business relatively anonymously.
Why is Switzerland Building the New Era of Blockchain Banking?
Swiss economic minister Johann Niklaus Schneider-Ammann recently laid out plans to encourage blockchain investors and start-ups to lay down roots in the country for a few different reasons. One of the biggest ones is to help the economy rebound after losing over 20 percent of the country’s banking institutions within the last decade alone. By leaving their reputation as a location for sketchy financial transactions behind and embracing a new one as Europe’s Silicon Valley, the minister hopes Switzerland can see a huge upturn in its economy.
As other countries are investigating stricter regulations, greater taxation, and more oversight with relation to cryptocurrency and blockchain start-ups, you can expect Switzerland to become increasingly crypto-friendly. The Swiss ICO market has already begun flourishing, with noticeable blockchain startups such as Impresso Labs rumored to be launching their ICO this fall. In 2017, ICOs based in Switzerland captured 14 percent of the global market; a massive feat. With the continued push to become a crypto-haven, the country aims to grab an even bigger slice of the pie.