Switzerland faces stiff competition as a blockchain hub
Japanese bank Nomura has decided to base its new cryptocurrency business in Switzerland. Keystone / Kimimasa Mayama
The decision by Japanese investment bank Nomura to locate its new cryptocurrency business in Switzerland appears to have vindicated the Swiss Ministry of Finance’s initiative to roll out the red carpet for blockchain companies.
This content was published on November 3, 2022 – 09:00
swissinfo.ch
Nomura’s ‘Laser Digital’ unit is exactly the type of crypto firm that Switzerland is targeting with its ‘Home of Blockchain’ campaign to promote the Alpine state as a prime location for international companies.
“Blockchain is one of the instruments that will transform and modernize global finance,” Swiss Finance Minister Ueli Maurer said at the launch of the scheme in May. “It is very important that the Swiss financial center plays a leading role in this transformation process. It will make us more competitive.”
The digital blockchain database, also known as Distributed Ledger Technology (DLT), enables instant transactions by cutting out intermediaries. Trading shares, for example, currently involves several stages of manual control before assets change hands. The Swiss stock exchange is convinced that DLT will streamline this process and save time and money.
Swiss lawmakers are also convinced of the benefits of blockchain. That’s why last year Switzerland revised its business and financial laws to embrace the nascent technology. The European Union and the United States are among other jurisdictions that are now following the same legislative path.
Slim lead
Switzerland has stolen a lead in blockchain, which has the potential to upgrade digital performance in a number of other business sectors. Companies such as Novartis, Nestlé, watch manufacturers and retailers are also experimenting with DLT to improve supply chains and help fight counterfeiting.
But Switzerland’s leadership is small, comprising only around 1,000 companies supporting 6,000 jobs. Maurer says that the country should ambitiously strive for growth in the face of increasing competition in the EU, the US and other countries such as Singapore and Dubai.
“We now have a chance to set the course for a technology that could become dominant in the years to come. We are prepared to compete with all other international players, he said.
Switzerland’s emergence as a pioneering blockchain hub started with an experiment in the central canton of Zug. In 2014, the Zug authorities allowed a group of entrepreneurs to set up a base for their new digital project called Ethereum, which is now the second largest blockchain operating system behind bitcoin.
A further experiment converted foundations, legal structures usually reserved for charities, into holding companies to soak up billions of windfall dollars that blockchains made by minting their own cryptocurrencies and selling them to the public. Many of the world’s most prominent blockchains, such as NEAR Protocol and Polkadot, have created Swiss foundations that now hand out millions in grants to startups that build projects on their platforms.
This in turn has proven to be a boom for consultants, lawyers, asset managers, brokers and accountants who advise startups on how to set up operations or help manage the funds of blockchain foundations.
Kryptonation mark
Switzerland has nicknamed itself the “Crypto Nation” for supporting the emerging blockchain industry – particularly financial firms, including brokerages, exchanges and fully licensed banks.
Solid administrative and financial infrastructure and legal certainty have traditionally been important parts of the furniture in Switzerland. This is attracting blockchain companies such as QPQ, which started Swiss operations this year.
“We engaged with regulators in different countries as we tried to build our business,” QPQ founder Greg Chew told swissinfo.ch. “We really struggled to communicate with a lot of them, but when we got to Switzerland it was a completely different attitude. There is a huge amount of learning in the Swiss system that allowed us to engage intelligently with the regulators. It was a big deal.”
But the cautious, methodical approach of Swiss regulators could stifle breakthrough innovation in the fast-paced world of blockchain startups, warns Mathias Ruch, founder of CV VC venture capital firm.
“They sometimes have to endure very long wait times before they get an answer to a question or a problem from the government,” Ruch said Glance newspaper. “This has resulted in some companies migrating overseas to Singapore, for example.”
Another potential bottleneck for Crypto Nation’s expansion ambitions is finding enough skilled workers to fill vacancies. A growing number of Swiss universities are attempting to tackle the talent crisis by launching courses aimed specifically at teaching blockchain technology to students. But at the moment, the demand for talent is outstripping the supply, creating intense competition for qualified workers between companies around the world.
Looking over shoulder
“Finding resources is absolutely terrible and very expensive. We are competing with American companies, with California budgets, who are willing to pay huge salaries, says Adrien Treccani, CEO of Swiss crypto company Metaco.
Nomura said it chose to base its Laser Digital unit in Switzerland because the country is “an established destination with a robust regulatory regime for digital assets and blockchain projects, and an attractive talent pool.”
The Alpine state positions itself as one of the most stable and reliable arenas for blockchain with a regulatory approach that filters out the more alarming or dangerous facets of the technology.
But with more countries raising their game, and some looking for a cut of the action by giving start-ups more freedom to experiment, Crypto Nation is looking over its shoulder at the competition.
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