Crypto in Switzerland: Navigating the peaks and valleys of institutional digital assets

Switzerland has long been leading the pack on crypto regulation. Will it ward off the competition biting at its heels?

Copper

For centuries, the world has flocked to Swiss banking.

Switzerland’s penchant for innovation, its robust legal framework, multilingual workforce and low tax rates all contribute to its acclaim as an international business and financial centre.

Building on the country’s thriving banking sector, Swiss lawmakers and regulators have pushed to embrace the increasingly digital environment in recent years– taking a pioneering role in the advancement of the digital asset economy.

Today, the Alpine country accommodates over 960 blockchain-based companies (including 11 unicorns) that support around 5,000 jobs.

Marcos Benitez, Copper’s business development director, based out of Zurich, says the move to evolve the country’s reputation as ‘the crypto hub of Europe’ is reflective of the growing number of traditional financial institutions gearing up to hold and trade digital assets.

“The Swiss crypto story is one of many firsts as the country was among the earliest to really see crypto’s potential.” He explains.

“For example, in 2018 Swiss banks were the first in the world to offer business accounts to crypto companies, recognising that banking channels would help eliminate fraudsters and encourage legitimate companies.”

“This cuts a stark contrast to other jurisdictions that are widely regarded as crypto-friendly, such as the UAE and Canada. Today, crypto projects and companies in these regions continue to report facing difficulties in securing banking services.”

Benitez also points to SIX Swiss Exchange, the third largest stock exchange in Europe, that in 2018 became the first in the world to greenlight a multi-crypto exchange-traded product (ETP). Indeed, the demand for regulated crypto investment products is soaring in Switzerland, with the country now boasting about 100 crypto related ETPs.

“As the US continues to drag its feet on crypto exchange-traded funds (ETFs), most market observers in the Crypto Valley remain puzzled as to why the SEC is having such a hard time with crypto ETFs.” Benitez says. “Following the success of similar products in Europe, Canada and the Middle East, many assumed that the US would soon take the plunge.”

In 2019, Switzerland yet again demonstrated it was one of the few places on the planet where regulators were actually keeping up with demand for digital assets. In a milestone move, the Swiss Financial Market Supervisory Authority (FINMA) granted banking and securities licenses to crypto banks, SEBA and Sygnum. These were the first such licenses granted anywhere in the world and enabled the banks to integrate crypto into a wide range of services.

Today, Switzerland continues to take major strides forward in its bid to remain a formidable world player in the digital asset industry.

“From a regulatory point of view, there has been a hive of activity lately.” Benitez says. “For instance, FINMA recently gave its blessing to SIX’s plans to operate a stock exchange and a central securities depository for digital assets. And just last week, the regulator approved the country’s first cryptoasset fund.”

“In recent months, we’ve also witnessed some cantons accept payment of taxes in digital assets, as do some private companies such as hotels. Meanwhile, the country’s central banking authority has taken the first steps on its exploration of a central bank digital currency (CBDC) with an attempt to foster more frictionless payments with neighbouring countries.”

Switzerland’s tireless commitment to incorporate and embrace blockchain-based technology may have propelled the country to the forefront of crypto regulation, but competitors are biting at its heels.

Liechtenstein has had its DLT legal framework in place for a couple of years, while Malta, Germany and Luxembourg also continue to take steps to embrace digital assets.

“Germany will be an especially important one to watch.” Benitez says. “The country’s regulator, BaFin, has provided clear pathways for compliant handling of crypto instruments. Not easy or quick, but clear.

“Recent regulatory changes in Germany to allow institutional investors to hold 20% of their assets in cryptocurrencies, is just the first step in what many market observers believe will lead to a flood of mass adoption of crypto as an asset class.

This summer also saw Deutsche Börse acquire a majority stake in Crypto Finance from Switzerland, demonstrating the German stock market’s commitment to build an institutional, regulated crypto exchange.

“Given Germany’s economic weight and influence, its approach to digital assets has the potential to shape the direction of Europe-wide regulatory attitudes to crypto.” Benitez summarised. “On the other hand, Switzerland may find that being independent from the EU’s regulatory framework permits it to be more nimble and progressive in its regulation of the sector, so it is likely the nation will remain ahead of the rest of Europe.”

“Finally, though the global cryptoasset regulatory landscape is undergoing change in both major and developing economies, anyone searching for proof that digital assets are now an institutional asset class should only look at how most of the world’s premier financial centres, such as Switzerland, are creating regimes to attract and encourage the growth of the crypto economy.” 

 

Marcos Benitez is Business Development Director, Switzerland, for Copper. He also serves as General Secretary of the Crypto World Zug (CWZ) Association, which he co-founded. Previously, Marcos held a management position at Gazprombank within the bank’s Crypto and Blockchain Services unit. He also has over eight years experience in finance, with a focus on compliance and combating international financial crime. 

Marcos holds a Bachelor’s in Law from Universidad de la República.

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