Switzerland wants to position itself as the leading global nation for the cryptocurrency market. The country holds the reputation for being one of the most advanced nations in the world with regards to financial services, banking, and technology. It’s not a surprise that today Switzerland ranks number one blockchain-friendly country in Europe.
The future of Switzerland is "Crypto".
The country has been at the epicenter of the wealth management industry for long, accounting for 27% of the global share wealth, according to Deloitte. A pioneer in the development of Blockchain technology within its progressive, modern financial industry and with Bitcoin being accepted to pay for goods and services such as train tickets, and with the emergence of Zug, Swiss well-known “crypto valley”, Switzerland makes many crypto investors dream. On top of it, the country’s tax-free policy attracts a plethora of startups and foreign companies from all around the world looking to consolidate their position into the blockchain industry.
What is the future of the blockchain and cryptocurrencies in Switzerland? What makes Switzerland so attractive for crypto investors?
Soon after having ended its world-famous bank secrecy in January 2017, the country had to rethink its positioning in the global financial sphere to remain as leader. Therefore, embracing a future based on blockchain and cryptocurrencies was an opportunity for the Swiss nation. Hence, to move away from the bank secrecy tradition and to further protect its reputation as a global place for healthy banking, Switzerland embarked on the blockchain and Bitcoin journey, promoting blockchain projects widely. This year, Switzerland was declared “largely compliant” by the Global Forum on Transparency and Exchange of Information for Tax Purposes, meaning the country was ready to open up to a new future.
Switzerland offers an attractive Environment for blockchain startups and cryptocurrencies.
Source: Deloitte Report The Blockchain (R)evolution—The Swiss Perspective, 2018
Switzerland benefits from a favorable environment on many levels that support the development of the blockchain and the crypto markets. From the public and private sectors to the government and the media, from the Swiss economic history as a liberal and democratic economy to regulating bodies such as FINMA, the Swiss ecosystem is solid and healthy enough to support the blockchain revolution.
Indeed, the blockchain is largely fostered by big banks such as UBS in Switzerland that plans to develop a digital currency linked to a central bank and tied to a fiat currency, according to Deloitte. The Swiss bank launched its Utility Settlement Coin (USC) with Deutsche Bank which allows financial markets to make payments and settle transactions securely, timely and transparently through the blockchain.
Plus, blockchain experiments in Switzerland go further than the dynamic financial sphere. For example, blockchain technology will be tested in a municipal vote this summer in the canton of Zug, home of the Swiss crypto hub. The blockchain-based trial municipal vote will allow people to vote directly through their mobile phones. Depending on the results, the test should allow Switzerland to strengthen its position as a global leading blockchain nation on many sectors.
Switzerland is an “unofficial” crypto heaven
With a comfortable ecosystem that supports the development of Blockchain and Bitcoin, crypto investing has flourished in Switzerland. For example, ICOs (Initial Coin Offerings) raised approximately USD 550 million in funding in 2017, which represents 15% of the global ICO market. Similar to the traditional IPOs (Initial Public Offerings), ICOs are a new financial strategy to raise capital through digital currencies and Blockchain technology that enables to fund projects and startups. In the context of ICOs, investors buy in fiat currencies (USD or Euro) and receive ‘”tokens” in exchange.
According to Mondag, the taxation in Switzerland is very attractive for ICOs:
- The implementation of an ICO does not require a specific type of company.
- An equity token, issued by an ICO, may be subject to a one-time capital duty of 1 percent, unlike a debt token.
- Any distribution of profits on equity tokens is subject to Swiss withholding tax at a rate of 35 %.
However, the taxation of ICOs remains a work in progress in Switzerland as there are no clear best practice standards available yet for crypto investors. Therefore, it’s the sole responsibility of investors and ICO issuers to look at the Swiss legislation from time to time to follow the progress regarding taxes.
FINMA published guidelines on ICOs regulations.
Nonetheless, the Swiss Financial Market Supervisory Authority (FINMA) published a set of guidelines in February 2018, in the hope of regulating ICOs. The report mentions that “in assessing ICOs, FINMA will focus on the economic function and purpose of the tokens (i.e. the blockchain-based units) issued by the ICO organizers.”
FINMA classifies tokens into three categories as follow:
- Payment tokens which are synonymous with cryptocurrencies as means of payment.
- Utility tokens which are tokens intended to provide digital access to an application or service.
- Asset tokens which represent assets such as dividends or interest payments, similar to equities, bonds, and derivatives.
Finally, the important focus of the body is to fight against potential money laundering and boost securities regulation relevant to ICOs. FINMA also published some guidance for investors, reminding them that many ICOs are still at a stage of development meaning they are subject to some uncertainties such as price volatility.
The blockchain is an excellent fit for Switzerland as the country is rooted in technology with forward-thinking banking and financial systems. Bitcoin is already largely adopted in some part of the country and is regarded as a currency. The current flexible Swiss taxations on ICOs enabled the rise of the crypto nation that is Switzerland today. With such a dynamic cryptocurrency market and the development of top blockchain-based projects outside of the financial sectors as seen with the municipal vote planned in Zug over the summer, the Swiss nation could be the first one ever to serve as a role model for future countries looking toward a blockchain and crypto driven economy. Savvy investors interested in the Swiss market should further go ahead as ICOs are booming now, bearing in mind the potential risks.
Also published on Medium.