Switzerland, World’s Pivot to Digital Currencies

Posted by on August 5, 2017 11:50 am
Tags: , , ,
Categories: regulation

You may hear it for the first time, but the Greater Zurich Area is likely the place where the future of global cryptocurrencies is scripted. It’s where top coins like Ethereum and Tezos have their headquarters, where a special law firm is drafting the necessary legal papers and where with the Crypto Fund AG world’s first cryptocurrency fund for institutional investors will start buying blue chip coins sometime in September this year.

As traditional banks don’t (yet!) offer such cryptocurrency products (even though they’re in growing demand), industry insiders leave the finance industry and start cryptocurrency enterprises by themselves. Take Crypto Fund AG, which is formed by finance experts and is only one of the many crypto funds being launched in the second half of 2017. Crypto Fund AG alone will start with some US$100 million buying capacity in the first year and hopes to manage crypto assets worth US$1 billion within three years.

They’re not one of the currently 70 hedge funds tied to cryptocurrencies that will lead to a downright explosion of volume. Crypto Fund AG is comparatively “boring,” bringing in stocks and forex trading as well as asset management experience to mainly focus on crypto blue chips such as Bitcoin, Ethereum, XRP and Litecoin. Their goal is not to maximize performance, but to give institutional investors’ portfolios access to cryptocurrencies.

Here is Crypto Fund founder and CEO Jan Brzezek:



Such crypto products for institutional investors don’t yet exist, and this is exactly the reason where Switzerland comes in. It’s the market place destined to become a center of large cryptocurrency trading and asset management. Remember, this is still very early stages, we’re just at the beginning of the digitalization and democratization of the whole monetary system, and it’s during these early stages when the direction of the future is crafted.

Take law firm MME with headquarters in Zurich. They’re the legal advisers behind Ethereum, Tezos and other leading blockchain players, drawing the legal framework and contracts for these cryptocurrencies. By now employing 14 lawyers fully dedicated to digital coins and blockchain, MME is the world’s leading crypto law firm and growing rapidly.

Combined with favorable Swiss laws for foundations — both Ethereum and Tezos are Swiss foundations set up in tax-friendly “Crypto Valley Zug,” Switzerland — the bet is on that the country will play a leading role in the growth and also regulation of the industry, but in a way that benefits both industry and investors.

Switzerland is extremely progressive regarding cryptocurrency and blockchain industries. Even more: Switzerland likely won’t give up its (in-)famous banking secrecy law for a second time, they’ll likely resist U.S. pressure to open up all books.

Switzerland is currently trying to carve out a version 2.0 of its old banking secrecy law, but this time for digital cryptocurrencies. The authorities are aware of this huge market of the future that will likely double its market capitalization each year for years to come.

Right, the U.S. Securities and Exchange Commission SEC and Singapore recently decided that an ICO (initial coin offering) is nothing else than an IPO (initial public offering) and therefore has to meet the same regulatory conditions.

It’s unlikely that Switzerland fill follow suit, for the very reason of carving out a global niche as a safe haven for cryptocurrency, officially and fully supported by the Swiss financial regulatory authority Finma which has a new focus on fintech.

So far only Bitcoin are legal tender in Switzerland, and the liberalization process will be careful for fear of anti-money laundering issues. For now only Swiss private Falcon Bank allows Bitcoin asset management, and you need to have an account there in the first place to be allowed to hold Bitcoins.

Yet the process is started and unstoppable. A second Swiss bank, Swissquote, partnered with Bitstamp to launch Bitcoin trading.

Combined with the regulatory framework being set up by nations across the globe and cryptocurrency funds being launched worldwide, be prepared for enormous liquidity to enter the market in the foreseeable future.

As the current exchanges don’t yet offer the liquidity for big money to enter without spiking prices, most large buys will be handled by block trades. The cryptocurrency offerings for big money are still very limited. Family offices are investing, under the radar. This while more and more well-to-do clients are calling their banks to buy cryptocurrencies and are told it’s too early…

Switzerland clearly sees the huge potential and is taking the right steps. The country’s finance industry could become globally relevant again, with the right legal framework and a banking secrecy law as back then, but this time for digital currencies.