Switzerland wants to be the first “crypto-nation”. And it’s well placed to do so. Find out why we made our home in Zug - and couldn’t have chosen anywhere else.
Behind the snowy peaks and ski resorts of Switzerland lies a beating, radical heart. It supplies oxygen to alternative ideas in government and finance that would be snuffed out in an instant in other countries.
It’s this pioneering spirit of exploration and experimentation that makes Switzerland the most fertile ground for the crypto economy to grow. That’s why SEBA is based here. Because we couldn’t do it anywhere else.
Let us explain the reasons.
Swiss democracy is unique. Rather than the representative democracy that dominates elsewhere, Switzerland has a democratic process whereby anyone in society can bring about democratic change. Swiss citizens can either propose legislation of their own (referred to as an initiative and requiring 100,000 signatures) or work to defeat legislation already approved by parliament (referred to as a referendum and requiring 50,000 signatures within 100 days). In recent years, this has led to healthy national debates around Universal Basic Income, agricultural policy, and yes – overhauling the banking system.
Switzerland is passionate about decentralization. The Swiss federal constitution introduced in 1848 lays down the powers of the Confederation and the cantons. The cantons, in turn, define the powers of their communes. Powers are allocated to the Confederation, the cantons and the communes in accordance with the principle of subsidiarity. The Confederation only undertakes tasks that the cantons are unable to perform or which require uniform regulation by the Confederation. Under the principle of subsidiarity, nothing that can be done at a lower political level should be done at a higher level. In other words, centralisation is kept to the minimum.
What does this democratic ethos and an aversion to centralization have to do with the crypto economy? Crypto assets are, by nature, decentralized. Their whole raison d’être is cutting out the middleman - allowing transactions and transfers to take place without the need for permission from institutional authorities.
And the Swiss political system is, by its very nature, decentralized. Rather than mediating the views of the public through politicians, citizens have direct input and impact on the future of the nation. Rather than delegating tasks to a central authority, communities retain power and delegate to a more centralized authority only on an ‘as needed’ basis.
This sentiment of direct democracy and decentralized autonomy is what has allowed crypto adoption to gain traction among the Swiss population.
Economics Minister, Johann Schneider-Ammann has declared that within 5 years, Switzerland should become the world’s first “crypto-nation”. The financial market regulator FINMA has published guidance to support ICOs – while other nations crack down on crypto. FINMA recently issued the first asset management license for a crypto company, another possible signal it’s warming up to the nascent Swiss crypto ecosystem.
This attitude is not surprising. Switzerland has basically zero raw materials and its economic development and success has rested on an innovative attitude, open towards and promoting new technologies as a way to compensate that historical chronic absence.
SEBA is pioneering such economic development with its intention to be of the world’s first fully regulated and licenced crypto banks. At SEBA, we believe we have the support of the Swiss authorities in pursuing a Banking and Securities Dealer license.
There is no ‘crypto banking’ license, distinct from a traditional banking license. So the impetus is on us to provide sufficient evidence that SEBA will have 1) the capital structure, 2) the advanced technology to integrate the fiat and crypto worlds, and 3) the governance to deliver according to the same standards of excellence required from traditional banks.
Provided we can meet those requirements, we believe FINMA will support us in our attempt to be one of the world’s first fully licensed and supervised crypto banks.
Because if a regulated environment cannot be created, institutional funds will never be able to enter the crypto market, and all the advantages of digital assets will be left to wither on the vine.
The great irony of digital enterprise is that it still develops in physical pockets. Geographic proximity and real-world networks remain the lifeblood of innovation.
Switzerland plays host to Crypto Valley, an area encompassing the Swiss city of Zug as well as the greater Zürich area. Zug hosts many significant global clusters, such as commodity trading (every third dollar is traded in Zug), biotech and pharma, family offices and hedge funds, and trade and sports companies. And last but not least, Zug is home to Crypto AG, founded in 1952!
Crypto Valley is home to many of the major players in crypto, including Ethereum – the second largest crypto asset by market capitalization. This concentration of crypto-industry has made the acceptance of crypto and blockchain technologies a priority for the Swiss authorities, just as Silicon Valley made tech a priority for San Francisco authorities.
Innovation so concentrated breeds success, invites investment and generates tax money. Beyond the cultural predisposition to the democratic nature of crypto, there is a tangible fiscal incentive to enable the flourishing crypto industry nestled between the mountains.
The result is around 600 blockchain companies are based in Zug, five of which are described as “unicorns” - startups with a market valuation of over $1bn.
Above all, Switzerland has a stable economy which is not threatened by the emergence of the Blockchain and crypto economy. One of the strongest global currencies of the past 30 years, the Swiss National Bank continues to hold back from further strengthening the Swiss Franc.
Switzerland was the last country to abandon the Gold Standard. Until 1999, the issuance of banknotes in Switzerland (by the central bank) had to be covered (up to 40% until 1997, and up to 25% until 1999) by gold and short term securities, making Switzerland the last country to formally abandon the Gold Standard, a full 28 years after Nixon floated the dollar.
Switzerland’s reluctance to de-couple its currency from a physical commodity is another expression of Switzerland’s raw democratic spirit – an expression of reluctance to let centralized authorities running monetary policy in total absence of an objective reference such as gold would be, in the eyes of the citizens.
Switzerland is traditionally a country of lower interest rates, extremely low inflation and almost no national debt. There is minimal capital flight. Switzerland’s national balance sheet stands in stark contrast to the massive debt accrued by other economic powers. For the most part, countries that are negatively disposed to the crypto economy are countries whose economic fundamentals aren’t as strong.
Switzerland has a deep heritage of protecting the wealth of its citizens. With crypto assets representing a possible return to a commodity-currency-like monetary system, it’s understandable the authorities would be keen to position themselves as champions of a new crypto economy, should it go mainstream.
Furthermore, Switzerland favors universal banking, something we believe is necessary for crypto to flourish.
A universal banking license allows financial institutions to engage in all the activities a bank might be expected to – transaction banking, custodial storage and distribution, asset and wealth management, corporate finance activities, etc.,
By contrast, many countries – like the U.S. – only allow banks to obtain licenses for specific functions. In many cases, these regulations were put in place following the 2008 financial crash, to limit the exposure of consumers to risky investment decisions.
Arguably, universal banking is actually safer, as it allows banks to diversify their holdings, and thus reduce risk. More to the point, we believe only a universal bank has the necessary flexibility to help institutional and private investors navigate the fledgling crypto-space.
Without a fully licensed and supervised crypto-bank, institutional money will never flow into the crypto space. Without institutional money, crypto will never go mainstream.
Put simply, we couldn’t do what we’re trying to do anywhere but Switzerland. And frankly, we wouldn’t have it any other way.