Swiss Crypto Startups are Promised Full Access to Banking Services
Swiss authorities are forcing banks to be friendlier towards cryptocurrency-related startups.
Switzerland wants to become a “Crypto Nation,” but there is a problem: blockchain startups are mostly cut-off from traditional banking services as Swiss banks refuse to operate accounts for them, citing strict anti-money laundering rules and other procedures related to managing clients.
However, the situation may change for the better as Swiss policymakers promise that this fast-growing industry will have full access to banking services in the coming month. The Swiss Finance Ministry is working Swiss Bankers Association (SBA) to remove this major obstacle to the growth of the industry, the Financial Times reports.
What's the problem?
Zug, a small lakeside town near Zurich, has become home to about 200 blockchain startups, which took Switzerland to the second place, after the US, based on the amount of money generated by initial coin offerings (ICOs). The cryptocurrency craze brought $1.46 billion of investments to the Swiss economy in 2017, but the banks want no connection to this industry, as it is vulnerable to hacker attacks and riddled with fraud.
Traditional Swiss bankers don't want to be mixed up in overtly shady or suspicious transactions. They are concerned that the privacy and anonymity feature of Bitcoin and other digital currencies may facilitate money laundering and other illegal financial activities.
However, the lack of access to traditional banking services has become a problem for the industry. While there are many ways to spend digital coins, they are still not as widely accepted as fiat money. It means that blockchain startups cannot cash out the funds raised on ICO and use them to develop their business.
Crypto companies try to find a way out, turning to banks in Liechtenstein and elsewhere for banking services, or resorting to third-party partnerships. For example, Coinlab Capital entered the deal with TokenPay, a blockchain-based payment platform registered in the British Virgin Islands.
According to Guido Schmitz-Krummacher, a blockchain expert and a former director of the Tezos foundation, by de facto banning crypto startups from having a bank account, Switzerland is killing the goose that laid the golden egg.
“Canton Zug has invested a lot of effort into building its reputation as a ‘Crypto Valley’ global blockchain hub. If banks fail to provide a reliable environment for start-ups to pay their bills then this image will take a severe hit,” he told swissinfo.ch.
“I am already seeing projects choose Singapore, Malta, and Gibraltar because they can’t get a bank account in Switzerland. They will be followed by projects already established in Switzerland unless the banks and politicians address this topic.”
Regulators are willing to help
Despite the critical approach adopted by global financial regulators, Switzerland wants to stand out and support the nascent industry. Economics Minister Johann Schneider-Ammann shared his “Crypto Nation” vision for Switzerland back in January, while the Finance Minister Maurer recently created a workforce together with the Swiss Bankers Association (SBA), the central bank and other regulators to break the impasse.
SBA seeks to develop a set of rules and standards to be adhered to by ICO-funded startups that will simplify the account opening process and minimize banking risks related to money laundering.
“Of course, rules on money laundering and other rules must be adhered to by blockchain companies. I can understand that banks are careful with respect to ‘know your client’ and anti-money laundering. But experts reckon the danger of money laundering is lower than in other sectors of the finance industry,” Heinz Tännler, finance director of Zug canton explains.
“Companies active in the blockchain area should receive banking services just like any other company. That way they will be stopped from choosing other domiciles — in countries where access is easier, such as Liechtenstein.”