Switzerland Scrambles to Regain “Cryptocurrency-Friendly” Status As Banks Dissuade Crypto-Businesses
Famously touted as the “Crypto Valley,” the Swiss city of Zug is losing sheen in favor of other cities and jurisdictions as cryptocurrency startups reportedly face difficulties in administration and governances in the European country.
Switzerland Faces Brain Drain
As reported by Reuters on July 19, 2018, cryptocurrency projects based in Switzerland are feeling the heat from banks and financial service businesses, with two banking providers ceasing operations for crypto-businesses in recent months.
The move sent shivers down the spines of cryptocurrency players in the region, who promptly relocated their businesses to Switzerland after significant regulations about the blockchain and cryptocurrency industries were introduced in 2017-18.
Now, businesses fear the banking crackdowns are shifting to Gibraltar, Liechtenstein, and even the far-off Cayman Islands to prevent any unforeseen stoppages to their operations, of which banking supports forms a significant part.
Swiss officials note the local cryptocurrency sector is gradually on the rise. Although insignificant in comparison to the country’s globally-acclaimed banking sector, the digital asset domain employs hundreds of people, proving to be a substantial source of industry for citizens.
Despite relevant legislation in place, Swiss banks are coaxing regulatory authorities to provide extra clarity and specify rules that apply to cryptocurrency businesses, before they can extend banking services.
As stated in the report, Switzerland’s fourth-largest bank, Zuercher Kantonalbank (ZKB) has closed bank accounts of over twenty cryptocurrency businesses in 2017, despite being the largest bank to provide financial services to the sector earlier. ZBK officials declined to comment on the nature of their decision in this regard but maintained no banking support is offered to any former or existing cryptocurrency clients.
Out of the country’s 250 registered banks, only a few permitted companies to deposit funds raised via initial coin offerings (ICO), with only two banks allowing this service at the time of writing.
A common complaint about the withdrawal of banking services remains that of money laundering concerns. Banks claim several token issuers failed to conduct their due diligence on contributing investors, creating a potential crime if they allowed the storage of unauthorized money – a feature against globally-followed Anti-Money-Laundering (AML) procedures.
Zug Losing Sheen
The remarkable development of Zug as a cryptocurrency economic is widely documented across media. The small canton, with a population of only 30,000 inhabitants in 2016, is home to over 300 cryptocurrency businesses.
However, Zug’s finance director Heinz Taennler expressed his concerns on the current state of banking support in the region, fearing the business may leave the famed region:
“All their banking relationships are going to Liechtenstein. These are hundreds of jobs that have been created, and every job is important.”
Swiss Official Reveals Reassurance
An official of the Swiss National Bank (SNB), Thomas Moser, stated representatives of a few cryptocurrency companies had approached the central authorities to intervene in the crisis.
Moser added the jurisdiction does not want to mitigate economic opportunities arising from the lucrative cryptocurrency sector or stifle technological innovation.
Notably, creating a globally-accepted framework for cryptocurrencies and token issuances is not an easy endeavor. Despite such challenges, Switzerland is reportedly working on regulations to addresses concerns from banks and encourage cryptocurrency businesses to remain in the region.
Cover Photo by Boris Baldinger on Unsplash
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