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Switzerland Teams Up With Liechtenstein To Show $44 Bln Crypto Market Valuation

Denis Goncharenko

Swiss Financial Market Supervisory Authority (FINMA) has recently issued the first-of-its-kind license to a crypto investment fund, allowing it to provide cryptocurrency asset management. This step is yet another measure of creating and developing an enabling environment for the crypto startups in the country, as it was described by Cecilia Mueller CHEN, Member of Crypto Valley Regulatory Policy Working Group, in her interview with Bitnewstoday.com.

The issued license allows the company to offer a collective investment products which include cryptocurrencies, as well as providing consultancy services for institutional investors. Obtaining such permission makes the company almost equal to the traditional Swiss asset management groups. “The move to grant a licence to Crypto Fund can be seen as a validation, perhaps better said, regulatory acceptance of cryptocurrencies. That is a massive step forward, and taking a major hurdle, as Switzerland wants to keep a leading role in terms of the self-proclaimed Crypto Nation,” comments Drs Hans KONING, CEO at Vicarium.

“The mainstream regulators are currently in the process of catch-up with USA’s SEC opening up secondary token markets through ATS (Alternative Trading Systems) such as Templum, UK’s FCA issuing Appointed Representative status to KooDoo Global, and here is FINMA allowing Crypto Fund an asset management license,”Olinga TAEED, Swiss Visiting Professor in Blockchain at Birmingham City University, provides his outlook to the current events on a global level.

It is already rumored, that the license issuance case provoked other crypto funds to rush to Switzerland for the licenses and approvals by FINMA, in order to operate under the Swiss flag and within their banking system. However, there might be some reasons behind such a regulatory move which are not so evident, but which drive Swiss authorities to act as fast as possible.  

It’s hard to become a leader. But it’s even harder to maintain leadership

The investment group Crypto Valley Venture Capital (CVVC) released the statistics that over 600 companies and institutions are now located in Switzerland and neighbouring Liechtenstein, with 3,000 people employed. The report of CVVC, which was released almost simultaneously with the news of Crypto Fund license issuance, is mostly devoted to the TOP 50 companies in the blockchain industry based in the ‘Crypto Valley’.

The presented statistics reveal that blockchain companies in Switzerland and Liechtenstein have a combined market capitalization of $44 bln. Sounds terrific. But having Liechtenstein mentioned here is for some reason - let’s see why.

According to the earlier report from PwC, Switzerland used to be the second in ranking at a global scale in 2017, just right after the USA, in terms of attracting the funds with ICOs. However, the situation has changed in 2018. In 2017, Swiss-based ICOs raised $1,462 mln. In 2018 this number decreased to $456 mln, putting Switzerland on the 6th place so far. This statistics appeared to be pretty gloomy for Switzerland, as the US and Singapore raised twice as more.

More than that, UK overtook Switzerland too, while its Overseas territories such as Cayman and British Virgin islands made an astonishing breakthrough in 2018, leading the rating with raised funds of $4,254 mln and $2,227 mln respectively. “Switzerland is not the only country who are encouraging blockchain elated innovation,” says Ivan A. GYIMAH, the founder of crypto company from UK. “For example, Malta and Estonia are a few to be mentioned. Switzerland has always been known to spur innovation especially within the institutional space, so I believe now they make a natural step.”

Indeed, the knowledge of losing positions couldn’t just pass by Switzerland. The leadership needed to be retained. The main reason for those great shifts of numbers were the obstacles the Swiss banking system used to put in front of crypto companies: they basically refused to open bank account for them. According to the regulation, if the ICO ends up to be scam or is involved in money laundering, then the bank bares direct responsibility, not only the ICO itself. During the year, FINMA has also held discussions with the SNB and bankers’ association on how to make banks more accessible to cryptocurrency ventures. “We would not want to close the door on the opportunities that such innovation might bring,” said Thomas MOSER, an alternate member of the governing board at the Swiss National Bank (SNB).

“The truth is that Switzerland has seen a lot of migration due to the obstacles that the banking system has put in the face of crypto-enthusiasts. Other offshore destinations appeared to be more friendly and welcoming when it comes to opening a bank account or setting up a new venture,”Richard SHIBI, ICO and blockchain consultant, ascertains the fact, previously presented by the PwC report. The consequence is that right now the Swiss government is working very hard to re-establish itself as the crypto heaven. But it appeared not so easy. “They are essentially trying to fit a new asset class into existing structures such as crowd funding to ensure least disruption to their rules which have taken years to mature,” says Olinga TAEED. “Other territories such as Malta, Gibraltar, have ripped up their rule books and taken a tabula rasa approach to create a more liberal market.”

“Together we are strong” becomes the motto of Switzerland for now

“When it comes to choosing the right destination for an ICO, there is more than one single factor to be taken into consideration. As for now, lots of ICOs prefer to launch from Switzerland and open a bank account in Liechtenstein, which is nearby geographically,”Richard SHIBI goes on with sharing his knowledge from the markets. So it is a task for Swiss authorities to keep the leadership in this sphere: the government and the banks must reach an agreement on how to deal with ICOs & cryptos in a friendly way while maintaining good control they are known for. Meanwhile, they seem to ‘partner’ with Liechtenstein to signal the markets that they are still leading the way: the numbers and facts in CVVC report look more solid with two jurisdictions combined. “A work around is becoming popular through dual registration – establishing a company in Zug but trading through Liechtenstein, or opening offices in London but trading in Malta,”Olinga TAEED brings it out from behind the scenes. “During this current shakeout period when no one really knows what will happen next, hedging your bets with least route of resistance appears like a good option. No doubt eventually they will gravitate to one or the other.”

The market is very dynamic and what used to be heaven last year is losing momentum to other destinations which were previously ignored, but emerged all of a sudden. “There is a constant drive among jurisdictions to offer a better framework and environment than ‘the neighbours.”  says Hans KONING. “Investors, funds and businesses are trying to remain ‘low-key’ but still seek the protection of distinguished jurisdictions — such as Liechtenstein. Switzerland has been in the spotlight for banking and financial services for far too long, so the current moves are outperforming.” The coming year will definitely present new shifts, and Switzerland strives to be in the midst of the events to protect the ‘Crypto Nation’ title from other competitors.

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