Conservative Swiss seek fintech niche

The central Swiss town of Zug hosts Switzerland's Crypto Valley Keystone

Having arrived to the party fashionably late (as per tradition), Switzerland is now positioning itself as a leading fintech hub. Welcome to the global party. 

There's certainly enough of the pie to go around and it makes perfect sense to have a range of interconnected jurisdictions driving forward the digital finance revolution. But what will differentiate fintech Switzerland from Singapore, London, Berlin or Silicon Valley?

To a large extent, Swiss firms will use fintech to both improve its strengths and tackle some ongoing challenges. There are already plenty of examples of start-ups - both cooperating with and disrupting - the wealth management, asset management and insurance sectors. Established companies in these industries are to a greater or lesser extent working out their own in-house fintech strategies. Regtech solutions also promise to save time and money for institutions bogged down in the regulatory red-tape of AML, KYC, 2B2F etc.

Beyond pure finance, blockchain also has potential to bring huge efficiencies to the commodities trading business (massive in Switzerland).

So who's the new kid on the Swiss block? Cryptocurrencies - not that Switzerland's inventing the stuff, but lawyers, accountants and consultants are cashing in on the crowdfunding ICO craze. Where do you put all the multi-millions you raise in an afternoon? A Swiss foundation, of course. Something like a quarter of the $1.5 billion+ raised by ICO globally this year is being shifted to foundations - mainly in canton Zug.

Mindset crucial

How can Switzerland extract more value from the fintech revolution? By attracting more basic research, according to Crypto Valley President Oliver Bussmann. In future, Crypto Valley will be inviting researchers and academics to conferences along with start-ups and money men. The theory goes that if the nucleus of the next big thing can be worked out in Switzerland then it increases the chances of the project staying here when it takes off.

But it might take more than that - something along the lines of a fundamental shift of conservative Swiss thinking, according to David Siegel, the driving force behind the Pillar Project. Siegel will shortly move Pillar Project to a London HQ, which is apparently better placed to host such a creative and ambitious disruptor. It seems the Swiss have trouble with a “company” that lacks shareholders, a board of directors and an obvious chairman.

Back to those ICO piggy banks in Zug, such as Ethereum Foundation, Bprotocol and Tezos Foundation. They are (or will soon be) distributing the funds to develop projects and turn dreams into reality. The fear is that precious little will stay in Switzerland – instead, being spent abroad.

Having arrived fashionably late to the party, is Switzerland wearing the right fancy dress costume?

Breadwallet seems to think so. It's setting up its global HQ here. “Switzerland has emerged as a hotbed of digital currency startup activity, and we were attracted by its leadership in conservative financial legislation,” says CEO Adam Traidman. “Its strong reputation for financial privacy for consumers is the ideal fit for our charter to empower individuals with the benefits of bitcoin.”

So for some, Swiss conservatism is an attraction, while it's a turn-off for others. Let's see where this leads us....

UPDATE: It looks like the Swiss government has taken notice of this inflexible company regulation gripe. Interesting.

Sept, 2017

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