Switzerland is more suitable than USA to host crypto businesses

Introduction

One of the world’s most competitive business hubs for crypto is Switzerland. Innovation and technology, a liberal economic system, political stability, close ties to international markets, superior educational and healthcare systems, an outstanding infrastructure, a high standard of life, and a competitive tax system are all reasons to base a business in Switzerland.

Due to its favorable legal framework, Switzerland has also emerged over the past ten years as a top location for blockchain and cryptocurrency businesses. This has drawn in businesses from all over the world.

Switzerland and crypto

Switzerland has become a thriving center for new business ideas in the cryptocurrency industry. This is due to its long history of financial security, strict privacy regulations, and practical regulatory approach.

In fact, Switzerland is an ideal candidate for developing blockchain and DLT for new global applications in a tokenized economy. This because of the pragmatic, business-friendly attitude of the Swiss authorities. The country offers a collaborative network and legal certainty for launching blockchain-based solutions. Key elements are the high concentration of corporate headquarters and an established blockchain-savvy ecosystem. Switzerland provides a trustworthy regulatory environment while also encouraging innovation.

“Crypto Valley”, which was founded in Zug, has gained a reputation as a global accelerator for new blockchain businesses. Early adopters like Ethereum and Bitcoin Suisse paved the way. In the meantime, Crypto Valley has grown significantly beyond Zug’s borders and now includes renowned blockchain ecosystems. The main ones are located in Zurich, Geneva, Neuchâtel, Ticino, Basel, Vaud, Bern, and Lucerne.

Regulations

For enterprises using cryptocurrencies and blockchain technology, Switzerland has created a clear legal framework that offers investors and entrepreneurs a stable and predictable environment.

The new DLT Framework went into effect in 2021, offering Switzerland one of the most futuristic legal frameworks in the entire world by making room for cutting-edge enterprises and completely fresh business models in the decentralized world.

The new Framework created a new license category for DLT/blockchain-based trading systems within the framework of financial market supervision. It increased legal certainty in the event of bankruptcy through segregation of crypto assets, introduced security rights registered on a blockchain thus improving the conditions for businesses using blockchain in Switzerland. The framework also provided a proportionate response to the risks identified in money laundering and terrorist financing.

FINMA 

The financial watchdog FINMA (www.finma.ch), works closely with the industry to comprehend technical advancements and their effects on the cryptocurrency and blockchain businesses. Financial intermediaries are under its supervision as they implement financial market rules. 

Since 2019, it has released a position statement on stablecoins as well as a practical guidance for permission inquiries. The pragmatic regulations of the nation’s legal framework also allowed it to authorize the first Swiss cryptocurrency fund in 2021 and to award a banking license to companies that specialize in distributed ledger technology (DLT) and blockchain in 2019.

Trust and Integrity

Switzerland has a well-established reputation for being politically neutral and financially secure. This can be crucial for cryptocurrency businesses operating in a sector that is very volatile and undergoing rapid change since it gives both investors and customers a sense of legitimacy. 

Additionally, the Federal Council places a high value on maintaining the credibility and high reputation of the Swiss financial hub. Therefore, in order to combat money laundering, the new DLT Framework makes sure that cryptocurrencies are subject to the same laws as traditional financial assets.

Indeed, Switzerland has been putting innovative anti-money laundering rules into practice. Activities involving crypto assets by financial intermediaries are covered by its federal Anti-Money Laundering Act. The same requirements apply to a Swiss financial intermediary that keeps or facilitates the transfer of cryptocurrencies on behalf of third parties as they would if fiat money were being utilized. 

Switzerland also participates actively in international efforts related to taxation of cryptoassets.

The Ecosystem 

Switzerland’s thriving and interconnected support infrastructure is advantageous for crypto businesses located in the country. It is a full-fledged ecosystem whose emergence has been made possible by framework conditions that encourage innovation and the legal security offered by the authorities. 

Early adopters, like the Ethereum Foundation, were very influential and drew a lot more businesses to the “Crypto Valley.” 

This development quickly involved other Swiss districts, from Geneva to Liechtenstein and from Zurich to Ticino. 

In addition to universities, venture capital firms, and different blockchain solution providers, numerous Swiss legal firms now give professional assistance. 

There are also numerous organizations involved in promoting the blockchain industry  Switzerland. These organizations are the Crypto Valley Association (CVA) in Zug, the Ticino Blockchain Technologies Association (TBTA) in Lugano, the Capital Markets and Technology Association (CMTA) and the Global Blockchain Business Council (GBBC) in Geneva, the Swiss Blockchain Federation (SBF) in Bern. 

The country also benefits from an active government that supports innovation and entrepreneurship, as well as a thriving startup ecosystem.

Talents

With a strong emphasis on research, engineering, and technology, Switzerland boasts a highly educated, skilled, and international workforce. 

Businesses can benefit from proximity to famous research institutions and a huge talent pool. For instance, the EPFL and ETH Zurich, two federal science and technology universities in Lausanne and Zurich, have been acknowledged as world leaders in the field of crypto education (Coinbase, 2019). The University of Zurich established a Blockchain Center in 2017. The Center is run by more than 20 professors who do research on blockchain-related topics. The Blockchain Center was ranked as a top crypto university by CoinDesk in 2021. 

In total, 20 higher education institutions in Switzerland’s multilingual regions offer courses on blockchain and technology. This results in a continuous inflow of workers with blockchain expertise. 

Tax system

Switzerland has a comparatively low corporate tax rate and provides enterprises that conduct R&D with advantageous tax treatment. For cryptocurrency firms that must make considerable investments in research and technology, this may be very helpful.

United States and crypto

State and federal governments in the United States have paid close attention to the crypto industry. At the federal level, the Office of the Controller of the Currency (OCC), the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Federal Trade Commission (FTC), the Department of the Treasury, and the Financial Crimes Enforcement Network (FinCEN) have paid close attention to the crypto industry.

Also, the US Congress has introduced various bills to bring more clarity to the developing industry.

The regulatory landscape for cryptocurrencies and blockchain technology in the United States is thus complex and evolving. Here are some of the key regulations that currently apply:

• The US Securities and Exchange Commission (SEC) considers cryptocurrencies and initial coin offerings (ICOs) to be securities and subject to federal securities laws. This means that companies must register with the SEC or qualify for an exemption to offer these tokens to US investors.
• As for taxation, the Internal Revenue Service (IRS) treats cryptocurrencies as property for tax purposes, meaning that profits from cryptocurrency trading and transactions may be subject to capital gains taxes.
• Anti-money laundering (AML) and know-your-customer (KYC) regulations: The Financial Crimes Enforcement Network (FinCEN) requires cryptocurrency exchanges and other financial institutions to implement AML and KYC procedures to prevent money laundering and terrorist financing.
• Some states have enacted their own regulations for cryptocurrencies and blockchain technology. For example, New York’s BitLicense requires companies to obtain a license to operate a virtual currency business in the state.
• The Commodities Futures Trading Commission (CFTC) has asserted that cryptocurrencies are commodities and subject to its jurisdiction. The CFTC has also approved several bitcoin futures products for trading on US futures exchanges.

Conclusions

US have always been leading the technology space. However, the DLT/blockchain technology has seen also other countries in Europe and Asia become top players.

Among them, there are several factors that make Switzerland an attractive destination for crypto businesses. The main ones being the regulatory clarity, the tax-friendly environment, the access to talent, the proximity to Europe, the reputation for trust and stability. But also a broad ecosystem made by several world-class crypto companies, leading research institutes, venture capitalists and foundations.

BrightNode offers incorporation and tokenization services for companies interested in locating in Switzerland.

In contrast, the United States has a more complex regulatory landscape, which can be challenging for crypto businesses to navigate. However, the US also has a large and sophisticated market for cryptocurrencies and a strong culture of innovation and entrepreneurship, which can be attractive to some businesses.

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