Switzerland acts to head off cryptocurrency exodus

July 20, 2018
Chris Wheal

Swiss regulators are stepping up efforts to halt a threatened exodus of cryptocurrency projects from the country, according to Reuters. The news agency reports that the already limited number of Swiss banks active in the nascent sector was further depleted last year after two withdrew.

Swiss town of Zug

Switzerland’s cryptocurrency activity is centred in Zug: Shutterstock

Switzerland is also working on new rules to reassure banks and encourage them to accept the accounts of cryptocurrency companies. The country dropped from second place in 2017 to sixth this year in a table published last month by PwC and the Crypto Valley Association that ranks the sum of initial coin offering (ICO) funds raised in various countries. The Cayman Islands and British Virgin Islands topped this year’s list.

The reluctance of local banks to accept cryptocurrency-related business means Switzerland is losing business to offshore rivals including Liechtenstein, Gibraltar and the Cayman Islands, whose banks are more welcoming.

In May, Swiss finance minister Ueli Maurer invited the Swiss Financial Market Supervisory Authority (FINMA), the central bank and the Swiss Bankers Association (SBA) to a roundtable discussion on bank accounts for cryptocurrencies.

Zug at the centre

While Switzerland’s crypto-related business is still tiny compared with its traditional banking sector, but has grown rapidly and is a major employer, according to local officials. Supporters also consider it a key innovation for the future of global finance.

The wealthy canton of Zug, outside Zurich has claimed the title of Europe’s “Crypto Valley”, with at least 300 virtual currency businesses opening there in recent years, against a population of only 30,000.

Zug’s finance director, Heinz Taennler, fears many of these businesses will depart if the government does not take steps to give them access to the banking system, without which they struggle to function. “All their banking relationships are going to Liechtenstein,” he told Reuters. “These are hundreds of jobs that have been created, and every job is important.”

Thomas Moser, an alternate member of the governing board at the Swiss National Bank, said some cryptocurrency companies had asked the SNB to intervene. “They raised concerns about problems with opening bank accounts, which was a worry for them, and asked for help,” he said.

“I said this was not something the SNB dealt with, but they should speak with FINMA. We would not want to close the door on the opportunities that such innovation might bring.

A call for clarity

Swiss banks have responded by insisting the authorities offer more clarity on the rules that apply to cryptocurrency projects if they are to serve the market, and at least two major players have withdrawn for now.

Switzerland’s Zuercher Kantonalbank (ZKB), the country’s fourth largest bank and one of a handful of global banks to welcome issuers of cryptocurrencies, has closed the accounts of more than 20 companies in the past year, industry sources told Reuters. ZKB originally helped to establish Switzerland as an early cryptocurrency hub.

One source also said that another major Swiss bank rejected crypto project Smart Valor at around the same time, although he/she declined to name the bank. Both banks reportedly began shutting their doors last October after a management feud severely damaged cryptocurrency project Tezos, which had conducted Zug’s largest ICO.

Few of Switzerland’s 250 banks ever allowed companies to deposit the cash equivalent of cryptocurrencies raised in ICOs, although the report suggests that at least two still do.

Many are concerned that some of the companies launching ICOs failed to carry out anti- money laundering (AML) checks on their contributors.

 

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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