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0:16
Hello and welcome to Let's Talk. Switzerland is often regarded as one of the leading blockchain countries in the world. But does the Alpine Nation live up to its name? And what does the future hold for the crypto industry here? That's the focus of today's discussion. So let's talk. What's the future of Crypto Nation, Switzerland?
0:44
We are coming to you today from the studios of the parliament building here in Bern. And joining us today, we have our wonderful guests, Alexander Brunner, author of Crypto Nation Switzerland, as well as Matthew Allen, business and fintech correspondent at Swissinfo.ch. Alexander, why don't we start with you? How did Switzerland earn the nickname as a crypto nation in the very first place? Give us a run through. It's an interesting story.
1:12
There's a lot of luck involved, but when the first people learned about crypto or Bitcoin back in the day, it attracted some developers that came here and eventually a few companies set up and then it all spiraled. Someone invented the term Crypto Valley and it got global headlines. And so one thing led to another with the government getting involved and more activities on the business side. Now Matt, you have actually been following this industry from the very beginning.
1:42
What actually caught your attention in your early coverage of the industry? Was it also a bit of luck, as Alexander mentioned? I think so. I was always very interested, almost amused that this sort of rebellious upstart tech revolution chose a conservative Switzerland as a venue, as a place to to host itself. But I think some of it was that these companies were looking for for a bit of stability. When I first encountered cryptocurrency as a journalist, I was at first attracted
2:18
to these headlines of of rebellion, these crazy characters behind it. And there were some crime stories as well. And I thought this would be kind of fun. So around about 2014 when the first companies started setting up in Switzerland I asked them about this and I actually soon discovered that this technology is not just
2:42
a website for drug dealers, there's a much more profound purpose and reason behind blockchain and cryptocurrencies, which could actually be a force for the good.
2:58
So it started off as a crime story, and now it's turning into a tech story. And maybe in future it will be really good news for society. We'll see. And in the space of a few years, we've seen so many developments happening in this area. The blockchain ecosystem continues to grow, continues to develope. And just for our audiences back at home, many are still drawn to the promises of this technology. And having a decentralized database and not having intermediaries.
3:28
So just think about a bank, a broker, a lawyer. Others, however, still remain sceptical. They think that it can be a tool for money laundering or fraud. But either way, the blockchain industry continues to grow, especially here in Switzerland. And we just want to bring you some figures up on the screen to show exactly where we stand at the current moment. Now, the number of companies in Crypto Valley in 2021 was 1,128. The crypto sector in Switzerland and Liechtenstein employs roughly
4:02
6,000 people, and in total there are 14 unicorns. So these are companies with a valuation of more than $1,000,000,000.
4:12
For both of our guests these numbers seem to paint quite a positive trajectory of the growth of Crypto Valley of Crypto Nation, Switzerland. What's actually behind these numbers Alexander?
4:24
I think it's important to keep in mind it's a very young industry and I think the development before 2017 was dramatically different than the last three years. What we've seen is a lot of large institutions adopting cryptocurrencies, blockchain technology, and also some coming to Switzerland because of that. But it's still a young industry, less than ten years old, and in terms of institutional players, maybe three years old. So we did a study, the Swiss Digital Asset Market report,
4:50
and this about 4,000 FTEs working in digital assets. If you compared it with the banking industry that has roughly 100,000 people employed it is still small but the trend trajectory is really growing. You see a lot of companies, coming to Switzerland, you see companies in the US and the UK, in Singapore growing at a rapid clip. So I think the momentum has really picked up in the last two years. Matt, do these numbers tell the whole story of
5:18
what's actually going on behind the scenes in Crypto Nation, Switzerland? I said before, it was a bit of an experimental accident really that took this industry off. It was a small canton in the centre of Switzerland called Zug, which really took a punt on a wandering blockchain company called Ethereum that was looking for a home. And they said, let them set up here. It's a tradition of Switzerland.
5:46
To encourage foreign firms to set up in Switzerland, but I don't think anyone could see then that it was going to create such waves and such headlines. What we saw was a massive explosion in 2017,
6:01
led by a wild price hike in Bitcoin which encouraged startups to crowdfund, or crowd raise, money from the general public. And suddenly you had an awful lot of companies, startups with millions and millions of dollars under their belt, looking for a home, and looking for somewhere to put that cash. And they came to Switzerland. Switzerland open opened its arms to this kind of thing. Along the way, of course, there was quite a few companies that came and didn't have a good business model.
6:38
They don't exist anymore. There were one or two scams as well. When you get this kind of public frenzy to get rich quick, these things can happen. Some of the companies disappeared. It was a Wild West phase, but now things have quietened down a bit. I think the regulators and the law makers have got this under control a bit.
7:00
Alexander, do you think we are past the hype, that we are past the frenzy, and how can Crypto Valley sustain this growth in the long term? Because you said the industry is still fairly small.
7:13
I would first really think about Crypto Valley as what is going on in Switzerland over all, not only in Zug. And a second thing is that if you talk about crypto or blockchain, those are actually different things. What you can see in Switzerland, is the intersection of traditional finance and this new finance of digital assets, you see a lot of traditional players entering. You know, Julius Baer bank is now offering services, BBVA, a Spanish bank has set up here.
7:42
Hedge funds are coming to Switzerland. This is the financial vertical. That is really becoming a bit more quiet because it's more regulated, there's less outrageous claims. Then you've got a lot of things happening in the corporate world, pharma activities with Roche and Novartis. That's again, corporate, a bit more subdued, less marketing. And you've got all those things that you could summarize under Web3. the NFTs used for collectibles and music, that's a bit more bubbly.
8:10
But I think if you look at those different verticals, you see that there's an institutionalisation drive going on and that makes it a bit more quiet, but I think also more sustainable for the future. And does that give it more legitimacy? Very much so. I mean, a lot of companies that I've just had dinner this week, UK based financial managers, they are coming to Switzerland because they're looking for sustainability. Everyone learned you can't build
8:36
a long term business by circumventing the law, let's put it like that. So there is this drive to have a legitimate set up. Switzerland has a law that can facilitate that. We have a regulation facility, we have whole service industry. And so we have a lot of things that let you set up sustainable businesses. So we've taken a look and assessed the situation at home locally in Switzerland, but on the global stage, what does Switzerland need to do to make sure that it keeps its name on the map? Matt
9:06
I think what Switzerland's done very well is to set up a framework
9:13
under which these, companies and this technology
9:18
can set up, can thrive without getting into trouble. It contains it without necessarily taking away the innovative drive. There's probably a couple of things Switzerland needs to do, and I know it's addressing this, one is to build up a domestic workforce who are knowledgeable and highly qualified in blockchain. And I know there are various universities around Switzerland who are now offering graduate and postgraduate courses. I speak to companies as well
9:53
all the time, that are coming in, and a lot of them say that they are hoping to inject some sort of Silicon Valley garage startup mentality. It's a thing that Switzerland sometimes struggles with, make the mistakes, that's fine, you have to break a few eggs to to create something useful. I think maybe this ort of attitude needs to come into the sector in Switzerland as well. What other strategies do you see in place for Blockchain Nation Switzerland to get its name out there?
10:26
In May we started an association, a public private partnership called Home of Blockchain that's endorsed by the Ministry of Finance, by federal counsellor Ueli Maurer. We really want to bring this message to different jurisdictions - I'll give you a very simple example. There's a lot of interest at the moment from UK managers in moving to Switzerland because of the current economic climate and the recession and various things.
10:51
The UK government and the regulator hasn't been very friendly to those start ups. So a few of our partners literally came here because they feel that it's a much more welcoming
11:04
ecosystem here. The second thing, that's a really big drive and we're going to have a big conference in November, is that traditionally Switzerland is a hub for Europe, and Singapore has been a hub for Asia and Singapore is really thriving. A lot of companies who have set up shop here, also have a presence in Singapore. And so this axis between Singapore and Switzerland is really beneficial for both sides. It gives companies a regulated set up in both regions.
11:31
And I think Switzerland has been very good also with the help of a federal councillor Ueli Maurer who's endorsing that. We're actually going to take a look abroad at jurisdictions like Singapore, Switzerland, Dubai in just a moment. But first, we went on the ground to find out exactly why some entrepreneurs and blockchain companies had decided to set up in Switzerland and why they still find it so attractive here. Take a listen. Switzerland really has a high reputation in the space,
12:02
because a lot of companies have set up here already in this space. A lot of foundations, associations, with a more up to date form or a different legal form for blockchains and protocols, have set themselves up in Switzerland. You have a network of service providers and of course also authorities like tax authorities, accountants that understand the nature of the crypto business. So what we see in general is that offshore jurisdictions lose a lot of attractiveness these days.
12:35
So a lot of institutional clients and people that are care about reputation, they do not want to do business if possible, with companies that are set up in offshore jurisdictions. This is why Switzerland is attractive from the outside and, quite frankly, from the inside. It's well regulated, it's well recognised, AML, KYC is well enforced. We really found that when we came to Switzerland there was a whole different attitude. When we spoke to other regulators, we found that we've really struggled
13:08
to communicate with them and I think some of that is down to them being short staffed and the fact that this is a very new area. But in Switzerland you've had so much engagement around this for the last five years. For example, the whole debacle with
13:23
Facebook's Libra coin was all done here. There's a huge amount of learning in the system here that allowed us to engage intelligently with the regulators. And actually, when we sent them information, they would read it and ask us intelligent questions back. So that may sound like it isn't a big thing, but actually it's a huge thing.
13:41
But then the other side of it is if you're doing fintech, you go to London, 40% of all the money that's come into fintech has gone to London. It is the the fintech value. If you like, Thames Valley is fintech value. If you are trying to build something around social media, you need to go to Silicon Valley.
13:58
But this is Crypto Valley. And actually when you think about it, we've just moved into Zug in June. We are within 200 to 300 metres of several hundred companies who would use the infrastructure that we're building. So I think it's important to understand that the Crypto Valley is as significant as Silicon Valley. We have to think about this as the platform on which the next Amazon of blockchain will be built. And of course our hope is, and quite frankly, I am confident
14:28
that some of the largest, most relevant companies will be domiciled, headquartered and also started in Crypto Valley, which is Switzerland and Liechtenstein. Two simple reasons. Firstly, regulatory clarity. We're dealing with a relatively new asset class, we need to ensure that all the regulators understand what we're dealing with and therefore have set guidelines within which we can operate. So that's the first reason. Second reason is, we have access to all of Crypto Valley here in Zug.
15:02
So there's a talent pool that's here, there's a knowledge pool that's here. And these two things are super important when you're trying to build out any business. So what are your first thoughts upon hearing this? We kept on hearing the word regulation pop up again and again.
15:23
The origins of Crypto Nation were a bit of a surprise. It was a bit of a punt and then suddenly an explosion of wild West proportions and then a response by the regulator and by the lawmakers to bring this under control, whilst at the same time adapting rules and regulations to incorporate and encourage
15:47
blockchain and cryptocurrencies. I think Switzerland has done this more effectively at an early stage than anyone else. And you've seen from those video clips that it really does help a company when they want to set up, that they know where they stand and then they're not going to get regulators knocking on their door with big fines every two minutes. I think that's something that that Switzerland's done very well. So the regulation and the environment here seems to be a drawcard
16:22
for some of those companies that we just heard. But where do you feel that Switzerland still falls short?
16:30
As we are a small nation, I think we have a lot of positives, as Matt says, on the regulation bit, the we were early. We have a whole ecosystem and what can't be overlooked is that we have a financial centre and as well with ETH and EPFL, a really strong technology research, academic environment that's sort of our fusing together in blockchain. And, and I think one of the interesting bits to be seen is that when we hopefully have mass adoption in the future of blockchain technology,
17:01
is Switzerland big enough as a market? So I think what you see here is a lot of focus on more the institutional or business side of things. If you want to scale on the retail side, you know, as was reasonable in Asia, obviously those markets are much, much bigger. So I think Switzerland has been really wise to pick the more business, corporate angle of things. And I think we're already doing that and that's the companies we heard about. They come here because they want that. If you're more into,
17:28
let's say, the more far out use cases, there's a lot of gambling or gaming that doesn't really happen here. It happens maybe in Asia. So I think we're okay if we keep focusing on what we have. So taking a look at the global stage, we know that Switzerland is not the only one to market itself as a blockchain hub. Over the years, crypto projects have also flocked to places such as Dubai, Singapore, Estonia. And earlier we spoke with Faisal Zaidi.
17:57
He's the head of the Crypto Valley Association's Middle East chapter. He's also the co-founder of Crypto Oasis. And we got his take on why he thinks Dubai is such an important blockchain hub. Take a listen. So the ambition is always to be number one. Their target for everything, for lifestyle, for health care, for education is always to be number one. And they have succeeded so far in everything they've set their ambitions to. And it's the same for blockchain.
18:25
So blockchain was a wider focus, but recently, in recent months, the Dubai Metaverse strategy was announced. And what they plan to do with the Dubai Metaverse strategy is to have about 40,000 new jobs in in the coming years, specifically in the metaverse field. And their target, which is not far off, is to be in the top ten cities
18:48
in relation to a metaverse economy. So for us, we've broken down the ecosystem into three parts. To build an ecosystem, you need talent, capital and infrastructure. Capital is coming from around the world. We've had huge funds come out of Abu Dhabi, like more than a billion dollars. 340 00:19:05,520 --> 00:19:09,720 And from around the world, they're setting up over here.
19:11
Talent is the likes of us where you're drawing people in from around the world. You've got designers, you've got founders, you've got engineers that are here. And third is the infrastructure, the infrastructure that's provided by the government for licensing for living. If we just look at the roads, if you just look at that entire setup as an infrastructure, it's what helps build the ecosystem. So talent, capital infrastructure, the provision
19:44
of all of that in one place is what's building the ecosystem. It's grown by 100% over the past year. And according to His Highness, they want about 4,000 companies over here in a matter of 4 to 5 years, so that it becomes the hub. So growing at this rate, I think that number is achievable.
20:06
Sandra, CEO of the Global Blockchain Business Council is also joining us live online to weigh in on the discussion we're having here. Sandra, in your view, what are the most attractive crypto blockchain hubs around the world right now? Who is actually leading this race? Thank you very much, by the way. I'm glad to be here. Greetings from Washington, DC. At the moment, I will have to say the centres that have already been listed, Singapore Dubai Switzerland
20:38
are absolutely centres as well as London. Obviously they've taken a bit of a back step in recent years. And I would also say, in spite of US regulatory lack of clarity, the New York and sort of Silicon Valley and Miami nexus have also created quite a bit of frenzy and activity and capital pouring into those locations. Sandra, why do you rank these hotspots so highly? What makes them so attractive in the first place?
21:09
Sometimes it is an accident, but actually more often than not, it is actually
21:16
pretty prudent and practical things. For example, regulatory clarity, the infrastructure. The cool factor. The ability for a group of entrepreneurs to be able to experiment and find the talent and capital and infrastructure, as was mentioned, to be able to go and try and build companies. I think where we're going to find a very interesting crossover is which jurisdictions are able to help companies scale into those unicorn type sizes that you've mentioned previously.
21:53
Switzerland was actually among the first to market itself as a crypto nation, as a blockchain country. Do you think it still deserves this label? Does it have the environment necessary to scale up and build and produce these unicorns, as you mentioned? Absolutely. I'll just give a very simple example of the GBC. We are a Swiss nonprofit foundation in the canton of Geneva. We started with a handful of members. We are now the largest in the world with nearly 600
22:23
institutional members spanning 95 jurisdictions. We have a team in Switzerland, but we also have teams all over distributed around the world. And I'm often in Zurich and Geneva as well as other cities in Switzerland. I think there's something very special about what's going on in Switzerland. And frankly, I think it will only continue. I'm very bullish on Switzerland, so it's not just a smart marketing tag.
22:49
It's real. I think there's substance and form to all that's going on in Switzerland. Thank you very much, Sandra, for joining in. We'll continue back with our guest in the studio. So we've already heard a few guests weighing in on what the future holds. But let's turn to you. It seems that competition is heating up despite what's happening here. We have to be mindful that there are other jurisdictions which are still presenting themselves
23:14
as being fairly attractive places to set up as a blockchain company. What does this mean for Switzerland as a hot spot going forward?
23:23
I think one thing to keep in mind is that there's this mantra in Silicon Valley; move fast and break things and be first mover. Everyone likes that. I think when it comes to financial services, when you look at the digital asset space, it's actually not true. It's the first ones through the gate that get decapitated or, you know, get out of the race. You've seen that with Diem and Facebook. So I think it's about getting it right.
23:47
And I think it's a finely tuned balance between regulatory technology and commercial interests. And it's more about getting this magic sauce. And I think Switzerland is doing that and focus on the B2B side, the business side. Other jurisdictions, the US is very good in starting companies and in venture capital. And Asia has a young population really eager to try out gaming and gambling and other things. So every region has its forte and I think Switzerland is really well positioned.
24:16
And the second thing I'd like to repeat, and also maybe Dubai's is a case in point, in Singapore. They've been very good in building This axis between our ecosystem and others and I think it's still very nascent, is still very small, it will grow and we need partners who can't just become big inside Switzerland. We need to have meaningful partners. And I'm very positive that Switzerland has already made a lot of good steps into that direction. Matt, what can you add here?
24:42
Do you think that Switzerland needs to move faster, build faster and get ahead? Well, let me address the scaling up argument that's used. Switzerland is a very small market. But if you look at the Swiss financial sector, it's had no problem scaling up around the world. It's huge. You look at the pharmaceutical sector, same thing. Of course, the Swiss market is only so big, but then you just move operations abroad as well. And and you can get that scale. And with something like blockchain,
25:15
which is non jurisdictional, it's out there in the ether, there should be no issues with Swiss based blockchain companies from from being these huge unicorns or the Amazons. It's having a firm base
25:34
on which to do it. I think Switzerland probably probably does, but as Alex said, not every hub is going to be the same.
25:48
They're not going to be competing in exactly the same way, just like Switzerland as a financial centre is a wealth management place. And New York is is more investment banking. So you will probably have this differentiation between different hubs worldwide as a blockchain hub here evolves, let's say, in 5 to 10 years. How do you think that ecosystem could look like? Alexander I think they'll be in three different verticals, so to speak. I think you will see different speeds.
26:19
I think if you look at the digital asset side side of things, there's even UK managers now coming to Switzerland while the big Swiss banks are still very careful about the topic. They haven't been willing to really engage even.
26:36
If you're a client, you want to buy bitcoin, you go to the big two banks, you're not going to be serviced very well. So I think there's still things to overcome on that side. I'm also very positive on what we could sum up on the Web3, on the collectibles. And if you have a big art market as well, Switzerland is leading art centre. We can combine that with blockchain and also the pharma world. So I think those type of there will be different speeds of adoption in different verticals
27:06
and I think Switzerland has a head start and I'm very positive too. So the ecosystem depends on what we look for. Hopefully banking will fully embrace it or to a larger extent. I think pharma and other corporates are already well on the way. And the interesting bit will be seen on the more creative side, The Web3, as it's known, Will that take root? Because we need entrepreneurs, as Matt said, Risk taking at which historically Switzerland hasn't been that good.
27:34
But who knows, maybe we will learn it. And Crypto Valley when we talk about it, it's not only going to be focused on this small town, small city of Zug anymore. I think it has not in the last couple of years. If you look now, as an example, Lugano has now adopted Bitcoin as official tender, One of those grassroots initiatives. Geneva and Neuchatel have quite a big companies set up in the space that are actually collaborating with the French ecosystem. And Zurich is a natural tech hotspot.
28:05
We have got Google here and Meta, And Apple, and those are already starting to look into the blockchain. So I think that even within Switzerland, as we are very federal and grassroots, you'll see different types of adoption depending on what kind of skill-set you find. Matt, final thoughts from you. Do you think that the hotspot here will continue to flourish and is it time maybe to think of a new name rather than Crypto Nation Switzerland?
28:32
I get a bit bored typing it to be honest in my articles and Crypto Valley as well.
28:39
And we just heard about Crypto Oasis in Dubai. They're great catchy names, aren't they? But let's face it, it's just a bit of marketing. I agree that that a couple of things need to happen anywhere in the world for blockchain to take off. First of all, you need to reduce this friction with the traditional world, particularly traditional finance. As Alex said, these two forces are almost like enemies, trying to trying to take a slice of the same pie.
29:10
I think once we see more of a merger between them, more understanding between them, then then then you will see
29:20
more companies and more services been offered. But the other thing is adoption by the person on the street. At the moment, it's not very easy to use blockchain services, a lot of them. And I think the companies that crack this problem of of how to make blockchain as easy to use as the Internet through a browser, will be the ones. And once this happens, then there should be a surge in global adoption, in the global industry, and Switzerland should be well placed to grab a slice of that.
29:57
Well, a lot of food for thought there. But as we've seen, we know a lot can also happen in the space of just a few years. Thank you very much, Alexander Brunner and Matt Allen, for joining us today here in the studio. And also a big thank you to the audience. Remember, you can share the content and follow the coverage on all the channels of Swissinfo.ch and we look forward to welcoming you for the very next episode. Goodbye.
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