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Happy Birthday, Switzerland, the Crypto Nation


This is a tale of two economies. One economy is local and super conservative, small but profitable. The other economy is global, thinking big and outside the box like Silicon Valley. Both are fertile grounds for entrepreneurs, but they are not just a little bit different, they are mirror images of each other.

Today is Swiss National Day. I feel very fortunate to live in this lovely country, which I have been coming to since I was a child (because my father was a keen skier and I inherited that passion). With my professional hat on, this post offers my perspective on how Switzerland as a home for Fintech has changed dramatically since the Global Financial Crisis.

The super conservative local economy

If you look at Switzerland from the point of view of a company planning a big global rollout, you see a market that is:

These attributes make Switzerland a good market for entrepreneurs who want to build something that is local, relatively small but very profitable. The market is ignored by big global players for a long time, so you have time to build a profitable business. You won’t get on any big global lists or interviews on global media, but you will have a substantial and profitable business.

In the digital realm, consider Comparis. As a search service, Comparis won’t rank well on any global lists, but try living in Switzerland and not using Comparis… I know it as user and not as a business, but I assume it is very profitable because everybody uses it.

The techniques you use to build this sort of local business are 100% different from the techniques you use to build a big business in the the aggressive global Crypto Nation economy. They are not just a bit different they are mirror images of each other.

The Crypto Nation journey from 2008 to 2018

Switzerland has emerged as a Crypto Nation during the last 10 years in the wake of the 2008 Global Financial Crisis (GFC) in 4 phases

Crypto Nation not Crypto Valley

There is a branding issue around the term Crypto Valley. It is too much associated with Johann Gevers, Monetas and Tezos and that branding now has some association with  hype and Swiss people don’t like hype. Precision is a value that the Swiss love. Branding through look and feel and user experience is is a value that the Swiss love. Hype is not.

However, there is no doubt that the real activity in the Crypto Nation is in the Zug Zurich corridor more than the Geneva Lausanne corridor (which has many other appealing characteristics). So the notion of Crypto Valley has some validity

Whether from Zurich or Geneva, all roads lead to Bern! I moved to Bern for lifestyle rather than professional reasons, but Bern is handily between Zurich and Geneva location wise and the home of the regulator (FINMA). If anybody wants to organise Fintech MeetUps in Bern please get in touch with me (bernard at daily fintech dot com).

The Zug Zurich corridor has the two attributes that Paul Graham (of Y Combinator fame) said were what you needed to get an entrepreneurial economy like Silicon Valley to flourish – rich people and nerds:

Switzerland is legally a multi-currency country

This was a lightbulb moment when I first heard about it at a MeetUp in Geneva in March 2015.

What? We all know Switzerland is multi-language, but we also know the famous Swiss Franc. It turns out that there is an alternative currency called WIR that was set up in 1934 that is quite legal. The WIR was set up by people wanting to create an alternative to a financial system that had failed so dramatically in 1929. Sound familiar? WIR accounts for a tiny % of Swiss GDP but it is real and legal. So the idea of adding another legal currency was not too big a stretch. That is why you can pay taxes in Bitcoin and buy Bitcoin at any railway ticket machine in Switzerland.

FINMA regulates 3 different types of Token by use case. One of them is a Payment Token (aka a Currency); the others are Utility Token and Asset Token (the latter is similar to Security Token in other jurisdictions).

This clear legal framework makes Switzerland a good jurisdiction for a crypto venture, along with two other legal and cultural attributes

Two other legal and cultural attributes of Crypto Nation

Apart from the MultiCurrency legal status and the number of rich people and nerds, there are two more legal and cultural attributes that make Switzerland into Crypto Nation:

Traditional Finance in Switzerland maybe flying too low

In the classic Icarus tale, we are cautioned not to fly too high. As Seth Godin tells us, the original tale also cautioned against flying too low. Traditional Finance in Switzerland maybe flying too low.

Bankers breathed a sigh of relief when citizens voted no to Vollgeld. They also escaped the worst of the 2008 GFC. This may lead to some complacency aka the boiling frog problem. Data from McKinsey should give bankers some agita. This is what we identified as the Wile E Coyote moment, which we can see playing out on the streets of Switzerland with branch closures or dramatically shortened opening hours with far fewer staff. Those famously high Swiss salaries mean that the numbers look very bad in the face of the digitisation truck. To see signs of this pain, go to Inside Paradeplatz (use Chrome if you don’t speak German).

In short, Crypto Nation in Switzerland is a disrupt before being disrupted story.

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Bernard Lunn is the CEO of Daily Fintech and provides advisory services to companies involved with Fintech (reach out to julia at daily fintech dot com to discuss his services).

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For the index to Bernard’s serialised book, The Blockchain Economy, please go here.

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