Switzerland using bitcoin and blockchain to keep alive the Swiss banking culture

Last Updated: Mon, Feb 26, 2018 20:33 hrs
Zug Zurich

Highlights:

  • Swiss Finance Ministry and Minister, and Economics Affair minister positive on blockchain
  • Swiss government launches blockchain task force
  • Swiss Financial Market Supervisory Authority (FINMA) comes up with guidelines for categorising ICOs as assets.
  • Tax and resource benefits for ICOs and blockchain startups

Top Swiss policy-makers are looking at digitisation and block-chain to keep alive the Swiss banking culture. The country's Finance Minister and minister for Economic affairs are the ones supporting a block-chain initiative.

Johann Niklaus Schneider-Ammann a businessman and politician, announced that Switzerland intended to become a "crypto-nation". A week ago, the minister participated in a crypto-conference in Zurich saying crypto-currency gelled well with the banking culture of Switzerland.

He also called block-chain as a technological incarnation of the Swiss state concept. According to him, block-chain is driven by combination of freedom, security, independence and decentralisation. Swiss banks have been known to keep secret, the money of the uber-rich. But in recent times, tax scandals, rise of tax havens such as Panama, and increasing pressure from tax authorities have eroded the Swiss legacy.

According to unverified reports, Switzerland's assets under management were in the range of $6.8 trillion. But in 2007, industry insiders said this number was as high as $10 trillion.

The state government has also launched a block-chain task force. According to insiders, this task force will regulate blockchain startups and ICOs. Ueli Maurer, the Swiss' Finance Minister and Schneider-Amman, the Economic Affairs minister, will be heading the task-force.

"Blockchain is becoming more important as a technology for many industries, not just crypto finance. What is needed is liberal regulation, which opens opportunities for Switzerland's position while at the same time reducing risks," said Maurer during an interaction.

If Switzerland is not supporting block-chain enthusiasts via business opportunities, officials are busy offering other programs to show a friendly approach. The Swiss Federal Council proposed a regulatory sandbox in 2017. The Sandbox allows startups to experiment with various ICO and block-chain related projects.

Besides ministerial involvements, the Swiss Financial Market Supervisory Authority (FINMA) has also intervened in establishing itself as a global hub for virtual currencies. The Crypto-valley in Zug, Zurich is an example of its intent. An unverified report finds that five Swiss-based ICOs raised nearly $600 million in funding. Bulk of that was from Zug.

The FINMA has launched a guideline for categorising ICOs. One of the guidelines says ICOs are securities. By categorizing ICOs, the government may be looking at collecting tax revenues.


An image of a financial hub from the town of the picturesque Zug.

There is also a possibility of tax evasion on token investments. The US IRS (Internal Revenue Services) is investigating the angle of US assets hidden in Switzerland in the form of cryptocurrencies.

FINMA has majorly suggested the following as guidelines for ICOs: ICOs will be categorized according to functionality.

  • Payment tokens: Pure crypto-currency are offered without additional facilities or projects.
  • Usage tokens: to serve as a tool to access a particular product or service.
  • Attachment tokens: These behave as a stock, offering dividends and interest pay-outs.

Mark Branson, the FINMA's Director was quoted as saying, "Block-chain technology offers innovation potential for the financial markets and beyond. [Such] Projects, which work in a manner like those requiring authorization, must not bypass the proven regulatory framework. Our balanced approach to dealing with ICO projects and requests, allows reputable innovators to navigate the regulatory landscape and launch their projects in a way that respects existing laws, protecting both investors and the integrity of the financial center."

ICOs and mining entities in Zug, Zurich are offered tax exemptions. Other exemptions include cheaper access to electricity consumption. The cold weather in Switzerland is already an advantage for bitcoin mining communities.

Besides these, there is also rumour that the government is planning to launch the e-Franc. Romero Lacher, the Head for The Swiss Stock exchange, said that a centralised crypto-currency controlled by the central bank could be good for the economy. The Swiss National Bank has so far maintained that it was against a crypto-franc for the country.

A growing market-base in countries such as Japan, US, UK, and South Korea, forced respective regulators to re-assess their crypto-views. But baring Venezuela, no country has been quite as open on block-chain and bitcoins as much as Switzerland. Bitmain, a Chinese exchange and mining platform that allows popular crypto- mining and trading avenue launched operations recently in Zug. According to unverified news reports, Bitmain's operating profits could have been in the range of $3-4 billion in 2017. For the record, chipmaker Nvidia made lesser revenues than Bitmain.

With China shutting down access to popular mining avenues, the opening up of Swiss indeed is a blessing for the crypto industry. But could it possibly be the secret sequel for the Swiss Banking Industry?

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