Switzerland Wants to Stem the Tide of the Cryptocurrency Drain
Switzerland is fast losing its appeal to cryptocurrency investors, to the worry of state and federal officials. Many virtual currency businesses, frustrated with the lack of banking support have moved their activities elsewhere.
The country is no longer a popular ICO destination. It dropped from second in 2017 to seventh in 2017 based on the amount of money raised by ICO crowdsales. To this end, officials are trying to come up with strategies that will enable the country to take back its position at the pinnacle of the global crypto industry.
Cryptocurrency Businesses Moving Offshore
Swiss-based cryptocurrency firms are moving their businesses offshore where banks are more welcoming to crypto companies. The traditional banking sector in the country dwarfs that of the crypto market. However, the emerging virtual currency industry provides jobs and positions the nation at the forefront of global fintech development.
In the wealthy Swiss canton of Zug, dubbed the “Crypto Valley,” there are about 200 to 300 cryptocurrency firms. Heinz Taennler, Zug’s finance director, believes that many of those companies will move offshore if a more enabling environment is not created. According to Taennler:
All their banking relationships are going to Liechtenstein. These are hundreds of jobs that have been created, and every job is important.
Apart from Liechtenstein, places like Gibraltar and the Cayman Islands are also prime destinations for Swiss-based crypto companies looking for friendlier banks.
Swiss Banks Reticent in Doing Business with Cryptocurrency Firms
For their part, Swiss banks want regulatory clarity before doing business with cryptocurrency firms. Of the over 250 banks in the country, only a few of them have ever done business with crypto companies.
That number has reduced with Zuercher Kantonalbank (ZKB), the fourth largest bank in Switzerland joining the ranks of financial institutions who don’t do business with crypto companies. The ZKB withdrawal was a significant blow given that its involvement in the first place gave a measure of legitimacy to the nascent industry.
The reticence of many Swiss banks to providing services to cryptocurrency firms stems from the loose regulatory conditions in the industry. According to some banks, many companies didn’t adopt anti-money laundering (AML) checks on people who invested in their ICOs. By doing business with such companies, the banks could run afoul of AML regulations leading to substantial fines and sanctions.
The Need for Cryptocurrency Regulations
The Swiss government is working to create a robust regulatory framework for the cryptocurrency industry. Earlier in the year, Ueli Maurer, the country’s Finance Minister gathered stakeholders from the central bank, FINMA, and the Swiss Bankers Association (SBA) to discuss banking support for crypto firms.
In the aftermath of the meeting, the SBA said:
Banks are currently hesitant to open business accounts for companies with particular touchpoints to ICOs and cryptocurrencies – due to risks such as fraud or money laundering.
The country’s finance ministry has also set about developing a broad legal framework for ICOs as well as blockchain technology businesses. The plan is to have all the studies completed by the end of the year so that the government can incorporate useful crypto regulatory laws into the existing financial rules and regulations in the country.
Do you think Switzerland can retain its place in the global cryptocurrency landscape given the giant strides being made by other countries? Let us know your views in the comment section below.