Blockchain hub Switzerland: why Switzerland is playing a pioneering role in crypto

The emergence of the Swiss Crypto Valley

Switzerland is well known for its financial and political stability, legal certainty and a pragmatic approach to regulation. Over recent years, it has become an emerging hub for innovative business ideas in the field of distributed-ledger technology (DLT). This applies to blockchain and cryptocurrencies in particular. Switzerland has established itself as a world-leading blockchain nation within a short space of time. With a strong network, clear regulations and highly qualified specialists, it provides the ideal foundation for growth and development in blockchain and is promoting Switzerland as a location for business and innovation.

“Crypto Valley”, a hub for blockchain companies and startups that was founded in the town of Zug, has played a major role in fostering this ecosystem. Crypto Valley is home to startups, companies and research institutions specializing in cryptocurrencies, blockchain technology and decentralized applications. The origins of Crypto Valley go back to 2013. It now extends well beyond the borders of Zug and covers leading blockchain ecosystems in Zurich, Geneva, Neuchâtel, Ticino, Basel, Vaud, Lucerne and Bern. Switzerland’s Crypto Valley now has around 1,135 companies in the blockchain sector and employs almost 6,000 people. The most famous crypto foundations, such as the Ethereum and Tezos foundations, Bitcoin Association Switzerland and the Crypto Valley Association, have their head offices in Switzerland. On the international stage, Crypto Valley is enhancing Switzerland’s reputation and innovative capabilities in the field of DLT.

She specializes in banking, insurance, finance and capital market law, general company and commercial law, and mergers and acquisitions, with particular emphasis on fintechs and blockchain, and possesses extensive experience in this area. Tina Balzli advises companies and institutions on legal and regulatory matters related to digital innovations, especially in the financial sector. Her expertise extends to topics such as cryptocurrencies, distributed ledger technology (DLT), tokenization and smart contracts. Using her expertise and experience, she plays a key role in the legal implementation of countless DLT-related projects.

What’s the difference between blockchain hub and Crypto Valley?

The term blockchain hub means a location with a high concentration of companies, organizations and specialists in the field of blockchain technology. It’s a place where innovation, R&D and applications of blockchain technology are driven forward. Crypto Valley is a specific term referring to the region in the Canton of Zug. The term suggests that a large number of blockchain and crypto companies are based in this region – the canton in Central Switzerland has become a leading center for cryptocurrencies and blockchain technology. 

Why Switzerland has the potential to become a world-leading blockchain hub

Innovation-friendly regulation and legal certainty

Switzerland identified the huge potential of blockchain technology early on and created a conducive regulatory environment. Switzerland’s clear and transparent provisions on cryptocurrencies and blockchain technology protect investors and support companies in the crypto sector. Switzerland is adopting a technology-neutral approach to this. “The key principle of tech neutrality is that it doesn’t matter so much how something is achieved on a technical level, but instead what is actually implemented and its impact,” explains Tina Balzli.

Using an example for investors, this means: “If shares are issued, they have a certain economic value and a particular legal function. It may be advisable to give the share ‘as a security’ the same legal protection, regardless of whether it’s issued physically on paper or on the blockchain. Swiss legislation takes this situation into account,” explains the expert in financial market law. 

The DLT Act creates a clear legal framework

Switzerland has created laws and provisions that take account of current and future technological developments. Staggered on 1 February 2021 and 1 August 2021, Switzerland became one of the first countries in the world where legal provisions on blockchain technology entered into force, representing a major milestone. “The DLT Act is a piece of framework legislation. That means it’s not a self-contained law, but one which amends other legislation, but only where the legislator has identified the need for change,” indicates Tina Balzli.

It creates a clear legal framework for the use of DLT and blockchain in Switzerland and enables companies to develop innovative solutions in the field of cryptocurrencies and blockchain technology while complying with the applicable legal provisions. Switzerland’s DLT regulations have also helped to build the trust of companies and investors in the crypto sector. This shows that Switzerland is endeavouring to create a favourable environment for the use of cutting-edge technologies. “There’s a consensus in politics and business in Switzerland about being open to the potential of technology and embracing it as an opportunity rather than perceiving it as a risk,” agrees Tina Balzli. 

Switzerland is a pioneer internationally

Switzerland has positioned itself as a pioneer in the regulation of cryptocurrencies and blockchain technology, making it extremely relevant to other countries wishing to establish a similar legal framework. “We’re currently seeing lots of institutional stakeholders enter the market for cryptocurrencies and digital assets. However, they’ll only do that if a reliable legal framework exists. Without this legal certainty, the market for digital assets and cryptocurrencies has no chance of becoming an effective mass market.”

Monetary security and traditional financial center

Switzerland has a decades-long tradition of currency stability and is renowned for its sound monetary policy and security. Switzerland is also a traditional financial center and an international financial services hub. It’s well known for its stable economy and expertise in asset management. This reputation and extensive specialist knowledge in finance create a solid basis for integrating blockchain technology into existing financial structures and developing new financial services.

Crypto-friendly banks

The Swiss banks have also recognized that cryptoassets will play a vital role in future. That’s why more and more financial institutions are incorporating crypto services into their portfolios. This includes the custody of cryptocurrencies, processing crypto transactions and supporting crypto projects. In view of these developments, the banks are playing a key role in establishing Switzerland as a leading blockchain hub.

“Swiss banks have definitely identified the opportunities presented by digital assets. Many Swiss banks already have in-house programmes that differ in terms of their nature and level of maturity. The banks play a vital role in promoting greater adoption of cryptocurrencies and digital assets, because they are still the decisive factor as a trust element, and conventional investors don’t usually want to deal with technical aspects themselves.”  

Progressive education system

Switzerland is home to some of the most prestigious research and educational institutions in the world. The two Federal Institutes of Technology in Lausanne and Zurich (EPFL and ETH Zurich) are also world leaders in educational programmes on crypto. The University of Basel is also playing a pioneering role in the research and development of blockchain technologies, and the first university professorship on blockchain technology in the world was established there in 2018. The University of Zurich has its own blockchain center, which was founded to explore the complexity of the shared trust from an interdisciplinary perspective. Around 20 universities in all of Switzerland’s linguistic regions now run programmes on blockchain technology. Overall, this promotes collaboration between research and business, as this kind of environment in turn attracts talented specialists wishing to benefit from this expertise, creating a thriving blockchain ecosystem.

Protecting the leadership position

Over recent years, more and more international companies seem to have also recognized blockchain technology’s potential and are modelling their supply chains with it or using it for the digital storage of assets. Companies such as Nestlé and Novartis are already deploying this technology.

The foundations have been laid: with political stability, innovation-friendly and reliable regulation, a strong tradition in the banking sector, first-class research and development institutions and a culture of openness and entrepreneurial spirit, Switzerland provides the ideal environment for blockchain technology to succeed. The financial center also appears to be consolidating its leading position by establishing digital assets.

Focus on the opportunities of crypto is essential to achieving further progress

To remain on track to become a leading blockchain hub, the Swiss people, business and investors need to be made aware of the tremendous potential for Switzerland as a business location that lies in Crypto Valley. “For the future, it remains important that Switzerland adopts a constructive approach towards innovative technologies, including as a people. Being open-minded, perceiving opportunities and not getting caught up with risks and problems, but instead reflecting on how to seize chances is vital.”