Switzerland has established itself as one of the leading blockchain nations in the world within a short time. It has one of the most advanced, most precise sets of rules. In global competition, Switzerland will be streets ahead of others in the jurisdiction.
Johann N. Schneider-Ammann, former Federal Councillor and Minister of Economic Affairs
Last week, former Openstream team member Alex and myself joined around 50 other crypto enthusiasts at Trust Square in Zürich for another edition of the CryptoMondays meetup. This time the event took place on a Tuesday, because it was part of the nation wide Swiss Digital Days. CryptoMondays is a decentralized global community that shares a passion for blockchain, Web3, bitcoin, and crypto topics. It was launched in 2018 in New York and now has members and visitors in over 60 cities. CryptoMondays Zürich co-founder Elvedin Mesic kicked off the event together with Trust Square co-founder Marc Degen.
CryptoMondays Mission Statement
- Increase engagement with blockchain through live events in every city in the world
- Provide education around crypto and Web3 topics
- Be the world’s largest community of Web3 enthusiasts
- Promote blockchain literacy and adoption amongst the global community for a more sustainable and healthy ecosystem
Transcript
Introductions
Elvedin Mesic: [00:00:00] Great we’re a few minutes late, we can start. We have the livestream going on the screen. Also a few people joining. Thank you very much for being with us online and big welcome from my side. I am Elvedin, the co-organizer and also co-founder of this beautiful Crypto Mondays chapter here in Switzerland. And today we are very proud to have a Swiss Digital Day Special. And if you don’t know what the Swiss Digital Days are, this is a nationwide event organized across seven regions with a lot of events, start up battles and a lot of innovation topics. And this week is the Zürich focus and the Crypto Mondays here is one of the events taking place as part of the Swiss Digital Days. Before we continue I would like to thank our sponsors. One of them being Uphold, one of the global wallet providers and digital asset banks. And secondly, Trust Square for providing us with this beautiful space and always making sure that we have nice rooms and technology and everything set up so we can meet and have a great time. And in that sense, I would also like to give the stage to Marc Degen, one of the co-founders of Trust Square and with our host tonight.
Marc Degen: [00:01:30] Thank you very much. So, welcome everybody, I’m really happy that everybody of you have found its way here to Trust Square. So really warm welcome from our side. We are really proud on the one side that we can be a partner of this Digital Switzerland initiative with the Digital Days and also welcome our guests here that will be introduced by you I assume and also on the other side being partner of Crypto Mondays as a series, we’re happy to support now on a monthly base and so please come again and enjoy all the locations we have. Also check out the services we have to say, which always has to be at the end, you know. So besides events and great, great ecosystem apéros, at the end of the day, we also provide space for startups and also services all around, especially token emitting entities. So whenever you don’t know how to move around the Swiss, let’s say specialities, we’re here to help. Thank you very much and have a great evening.
Elvedin Mesic: [00:02:40] Thank you, Marc. And I didn’t forget … our great guests, but our great guest will be introduced by Aliya. And that’s how we’re going to roll and continue.
Aliya Das Gupta: [00:02:50] Yeah. So first welcome, everyone. I’m so glad that you all are here today and we’re doing the Swiss Digital Days Crypto Mondays special edition on a Tuesday. I wanted to kind of set the stage a little bit for why are we talking about what we’re talking about today? It’s clear that the crypto community is a very active one. It’s a very vocal one. But why is it got such a loud voice on the global stage? Why is everyone sort of talking about it? Yes, of course, there’s a lot of money to be made here. But fundamentally, I think it’s nice to understand or get into the power of network, because what is a trustless network without a network? So we wanted to also explore a little bit today looking at Switzerland, because on a global stage you see Switzerland really punching quite far above its weight when it comes to crypto and crypto community stuff. So it’s interesting to look at why that is what’s worked, why has it worked and how are other countries maybe not doing as well or perhaps also doing really well and maybe we learn more about that today. So it was really good for me to reach out to the founders of two big crypto communities here in Switzerland. First, of course, the Swiss Blockchain Federation and Pascal, thank you so much for joining us. And the House of Blockchain with Alexander. Big round of applause to our speakers today. And and in terms of the way we set up, we will do a quick introduction. So about 10 minutes to the SBF and then 10 minutes about the House of Blockchain, and then we will have a nice little chat. And also we welcome audience participation. So if you’ve got any questions, get them ready, get them fired up and we’ll stop in between to ask you for them. So without any further ado, let us kick off and, Pascal over to you.
Swiss Blockchain Federation
Pascal Ihle: [00:04:48] Okay. Thank you. Good evening. Hello, everybody. I’m the nice guy without the tie this evening. I had a tie, it was a very old picture of myself. Sorry. And you chose this one … one. And so I decided not to wear a tie. And he was jealous about the picture. So that’s the reason why Alexander wears a tie. So, yes, my name is Pascal. I’m working as a partner in a communication agency, and we are running the Swiss Blockchain Federation, which is maybe it’s about regulation, it’s about networking, but it’s quite interesting. And I tried to explain why this Swiss Blockchain Federation is responsible, partly responsible for the well-being of the Crypto Valley and the Blockchain Nation Switzerland. Because history shows that every time when there is a new technology at the beginning, the build of the technology and the nerds, they are doing everything with it, just thinking about the possibilities. I just read a book this summer about the first cars in Paris and in London. So imagine it was a time where there were absolutely no rules. So the cars were driving on the right side or the left side, and they didn’t know exactly how to turn on which side. So there were many accidents and many deaths. And when they had the first death, of course, the politicians came, the regulators came and said stop. We have to define some rules. And so the rules were defined. And with the blockchain technology is exactly the same. And I want to show you the first picture and tell a little bit the story around this. The man in the middle here, this is the former minister of economics Johann Schneider-Ammann.
Pascal Ihle: [00:06:32] This one is the former minister of economics of the canton of Zug. And these two guys here are the founders of the Swiss Blockchain Federation. Why this picture? In 2016, 2017, in the Crypto Valley there was this big time this all these of ICO firms and startups and so on. We went to Crypto Valley and learned from the new entrepreneurs what blockchain was and we saw that there was quite a huge potential for Switzerland and for the technology. And we realized at the same time that in Bern the politicians had absolutely no idea. So we organized a round table where we invited the Minister of Economics, the actual Minister of Finance, Ueli Maurer. Thank you. Thank you. Some entrepreneurs from the Crypto Valley, some politicians, some people from academia. And we had four questions. The first question was, what is blockchain? Second question, this is not an easy question for us. Especially for politicians to understand what decentralization meant and so on. The second question was Why are they located in Switzerland? The very third question what could be the potential of this technology for Switzerland? And the first question was what should be done that this Crypto Valley will stay and remain in Switzerland and not go somewhere else? And out of this question of this roundtable, the politicians asked to build a task force with the task to write a white paper about the needs of this community. And here on the stage, you see this paper here that Johann Schneider-Ammann has in his hand is the white paper. And this white paper gave birth to the Swiss Blockchain Federation, which was a private partnership between politicians, between academia and the business side, industry.
Pascal Ihle: [00:08:37] The idea was just to build a bridge between the worlds, to educate and to discuss to the politicians, to the government, to regulate this, to look at the framework for this new technology here in Switzerland is quite right. So the goals of the Swiss Federation is just to promote a prosperous, secure, innovative and world leading blockchain ecosystem. The first one is just to look for the framework, for the rules. You mentioned the cars they have to drive. Second thing is networking and innovation. Maybe what we are trying to do with the Swiss Blockchain Federation, it’s like this kind of ecosystem trying to connect the dots. So you have the financial center, the financial actors, you have venture capitalists, you have academia, science, you have the industry, you have startups, service providers like law firms, what quite important infrastructure and politics. We had too, I think, too big success in this. The first one was in 2018/19 where we helped, of course, we were not the only one, but we were a partner for the whole process that the FINMA approved the world’s first two crypto banks SEPA and Sygnum. I think that was a milestone for Switzerland and the other one in 2021, contrary to Liechtenstein who adopted a blockchain law. This was a legislation. It was adaption of ten existing laws to make certain transaction or to make transaction of digital assets possible in Switzerland. And the other one was as well, that there was a green light for the SDX, this is the Digital Exchange of Switzerland of SIX to make a marketplace for digital assets.
Pascal Ihle: [00:10:32] Of course, we made some media work as well to promote everything. How we are constructed? We have a board which is the most important body of the Swiss Blockchain Federation. So you see, if you have the president is the Governing Council of the canton of Zug, we have some entrepreneurs, we have academia, and we have politicians from different cantons and we have working groups. And this working groups is quite the brain of everything. We have some about token offering banking industry, … regulations, sustainability, taxes, and there is one in evaluation about energy from the Federal Office of Energy tries to figure out whether with the blockchain technology we can improve the whole energy infrastructure in Switzerland. So this working groups, they are publishing papers. They are, for instance as well, discussing with with FINMA with regulators. They are in constant discussion as well with the parliament. If there are some questions about DLT and blockchain regulatory. So here we have some of the members. We have three cantons. You see that there are certain companies from the Crypto Valley and you have some law firms like Homburger or IBM or Novartis, which are part of it. So here as well, we have the Old World and the New World meeting together. So that was it for the introduction of the Swiss Blockchain Federation. And I’d like to … 10 minutes, I’d like to hand over to Alexander. Thank you.
Home of Blockchain
Alexander E. Brunner: [00:12:20] Thank you. Thank you, Pascal. I’m really happy to be back at the Trust Square. Who of you know the original Trust Square who has been at the original location. Oh, there you go. Good seeing you again, hello Sara. Back in 2018, it was at Bahnhofstrasse close to Lakeside, and it had a brilliant terrace. And we had once a party and then we projected a bitcoin logo on the Swiss National Bank. I don’t if you were there, but it’s great. Great to be back and see the community. Thank you for for having me. My name is Alexander Brunner, I’m the present of Home of Blockchain is actually not house, just home, but it’s almost the same, don’t worry. And we’re a spinoff of Swiss Blockchain Federation and we actually co-founded with my colleague Pascal. It is the same. I’ve been a member of Parliament for seven years and I work as advisor. And actually the next 10 minutes I want to be really fast as everything in technology is fast. I want to quickly look at the past, the Crypto Valley development in Switzerland and why that’s important. Then I’m going to come to the present and look at a few or one of the key drivers of the space and I’m going to look into the future as I think there’s going to be multiple futures for blockchain, not only one. So bear with me and I hope I’ll be fast enough. So this is a chart, I don’t know, some of you might have seen it. It’s been often used. The Swiss ecosystem, the digital asset, blockchain crypto ecosystem is less than ten years old, which is quite amazing because it’s a young technology and also the ecosystem is very young. It feels like it’s been around for a long time, particularly being here at Trust Square. But it’s not. And one of the interesting aspects of Switzerland is there’s a few, but one of them is that. Sorry. I’m doing anything.
Pascal Ihle: [00:14:01] It’s the tie. It’s the tie.
Alexander E. Brunner: [00:14:07] And Switzerland never had a big plan. For example, Singapore just published a Singapore Financial Survey’s Trend Industry Transformation Map 2025. And they have a big plan and they say the regulator, … this and that, Switzerland never had that. So it’s very grassroots bottom up, which is good because we Swiss like our federal system and the blockchain is decentralized. So I think there was a natural fit. The second thing was that it was a lot of that has happened and Pascal just said, at the intersection. I really don’t know what’s up. Yeah. Sorry about that. Okay. Anyhow, sorry. And the second thing, which the Swiss Blockchain Federation is a good use case and the Home of Blockchain as well is public private partnership. So the government works quite actively with the ecosystem and you can see that here on the bottom, you see a lot of Swiss flags. So the regulator issued in 2018 the first ICO guidelines, in 2019 the first crypto banks and the parliament passed the DLT law, which is not entirely true because it’s not a law, but it’s amendments to certain rules. But anyhow, you see an on top, you have Ethereum in 2014, you have Tezos coming Cardano. You got there from the other companies coming. And it shows that the Swiss approach is bottom up, grassroots and very distributed, decentralized. And I think it’s been a success story.
Alexander E. Brunner: [00:15:40] And as Pascal said, this may actually relaunch an initiative to promote the Swiss approach and Swiss values abroad. And we’re very glad that the Home of Blockchain initiative is supported by the Ministry of Finance. Again, we’re a public private partnership. Our partners are different cantons, the economic promotion boards, system of enterprise and many private companies. We have FTX, Sygnum, 21Shares, unicorn, Copper, a unicorn, Hidden Road, that’s a big prime broker, Cardano, SwissOne Capital, Eternyze that’s a Glencore spin off and have I forgotten anyone? Copper, excuse me, Copper a … UK. So again it’s a typical Swiss approach of public private partnership and we produced a report and you can download it for free. I’ll show you later. And actually we did the first survey, a quantitative survey, and we charted this ecosystem. It has now more than 50 entities. And again, what is really interesting and I think is very typical for Switzerland, you have a lot of sort of companies from traditional finance. You got Julius Baer, you’ve got PostFinance you know the guys and you’ve got a lot of the new kids on the block, Sygnum and SEPA and those kids. So it’s a very Swiss approach and it’s growing and I think it’s a very healthy approach as well. And to show that Switzerland has become very active, those are a few of the companies that recently have come to Switzerland.
Alexander E. Brunner: [00:17:08] It’s by no means a complete list, but just a few of them. FTX has now European headquarters, I think it’s here. Hidden Road is a US prime broker, quite a big one … is behind it. And Maker (?) is actually a Web3 application of Cardano. They moved from Berlin here. You’ve got Copper that’s a UK unicorn. Brevan Howard, a UK hedge fund, is headquartered now for digital assets in Geneva. So it shows a lot of those companies are coming here because they like the environment. So that’s the past. The present is … what has been the big driver in the ecosystem there’s been many drivers. but one interesting one is venture capital funding. So this is number from 2021. And you can see how it peaked last year at more than $31.6 billion and it even continued this year. So you see 1 billion in the first quarter, 1.4 billion in the second quarter, and massive funds. Andreessen Horowitz raised a 4.5 billion fund. And this is a venture capital. Venture capital funds used to be 200 million, a big one was 500 million. So 4.5 billion is a lot of money coming our way. So they’ve been very active and they’ve been supporting projects and obviously the past returns are amazing. I don’t know if you’re familiar with VC returns, but the average IRR is this internal rate of return is 104% percent.
Alexander E. Brunner: [00:18:35] A typical VC does 20 to 25%. This is four times the VC funding. Now the question is, and that’s my favorite chart, how do you make so much of money? I’m sure some of you have heard about Solana now has, as anyone invested early on, any happy Solana owners or not. So there you go. Someone is here. I don’t know. I’m not going to ask you when you bought and when you sold. But the interesting thing is they raised $336 million. And as an investor, lots of VCs you’ve got or whatever SOL (?) thing it’s called and you’ve got it for $0.0025. And as you can see, it went up to more than $200. So your investment returns, if you had perfect timing, was very good. I think that has been a big driver. The downside, the critics say, hey, what crypto invented is nothing new. They just invented an ATM you can invest in. And in an ATM you produce, you invest in and it spits out money. And that’s basically what has happened. So in a way, the innovation for crypto ICOs and coin projects is that in VC you invest, you wait seven, eight years, then you have an exit, crypto turned it on its head, you promote something, you get an exit and then you maybe build something.
Alexander E. Brunner: [00:19:50] And that was not always the best approach, but it has been the driver. And I think going forward I think there and ending that you have a few forces at play and I think there’s going to be different futures, not one future for blockchain. And I think the forces are funding, you know, pay attention to where funding is going, because money does generate work and then it generates outcome. But regulation, I’m sure you’re very familiar with that. And last but not least is consumer adoption. And I think that’s something that’s going to happen more and more. And I think depending on what your targets are, you are sort of looking at a different future. So the Web3 creator economy, metaverse, typically associated with NFT collectibles, e-gaming, that sort of regulatory light (?), a lot of development also in Asia in that sector and I think that’s a safe sector. A lot of the VCs have been talking recently, they’re all shifting to Web3. Why? That’s the middle bucket, the traditional finance entering decentralized finance. As you might have heard, the White House has issued a framework about the responsible deployment of digital assets. The regulators are coming … I was organizing an event earlier this year, and Do Kwon should have been the guest of honor. He didn’t come. For some of you, he was the Terra LUNA guy.
Alexander E. Brunner: [00:21:10] And now the Americans sent him a nice invitation to visit US prisons. Anyhow, so the … (?) what I see there, a lot of big guys are moving, you know, crypto is here to stay, but big players are coming. Hidden Road is just one example, one of our partners. Citadel, one of the biggest market makers … (?) in traditional finance are now moving into digital asset. And those are big, big, big guys coming. So watch that space. And I think Switzerland is quite well positioned. And then you got all the other bids that a lot of the community doesn’t like is big tech. And if you saw Google on top, right has been the biggest investor in blockchain and they’re coming who has read that the ECB is using Amazon to develop a CBDC. You heard about that? And you heard about that the EU wants to create NFTs against counterfeiting and they’re going to work with Tencent, a Chinese company. So watch this space. So anyhow, if you want to learn about Web3, a little self promotion, I’m going to launch a physical and NFT very soon you can check it out … a tradition and if you want to learn more about the ecosystem or download the report for free and ask me and I’m looking forward to discussion. Thank you.
Fireside Chat
Aliya Das Gupta: [00:22:36] Awesome. Thank you, guys, both for quick introductions. And now, as promised, we have a fireside chat. And I think it’s really interesting to see sort of both the origins of the organizations that you’ve set up that have come with a lot of government support. There’s been an immense amount of push from the center as well to kind of create this ecosystem here in Switzerland. And maybe we didn’t do a full introduction of our speakers before. I was hoping they would do it as well. But Alex … actually used to be on the parliament for the city of Zürich, right? I mean, this is seven years prior and today you’re working now with the crypto ecosystem and setting up this organization, the Home of Blockchain. How would you say your experience has been working in traditional government and then working in this sort of it’s not really governance in the traditional sense, but you’re working in almost DAO setup with decentralized counterparties. So yeah, I would love to hear you speak to that.
Switzerland’s Strenght
Alexander E. Brunner: [00:23:50] I think one of the strength is in Switzerland that we have a very federal structure. It’s really dispersed and decentralized. I mean, recently … (?) now where Lugano and Lugano recently decided they want to accept bitcoin and tether in payments. You can read up on Forum B, they’re going to have a big conference. And the interesting approach, what I like a lot about that, about the Swiss approach versus a top down approach like you know the US is doing and want to have a White House framework of … (?) Swiss are like … I mean Zug was very early, they tried something. Now Lugano is trying something. Now Geneva wants to try. So it’s a very test and trial and error approach. Instead of saying we know best and someone asked, you know, is wearing the wise hat and approaching so and all the companies I’ve talked to like the Swiss approach that you can approach the politicians in the regulators sort of, but you can have a common conversation. I mean, I’ve talked to German companies who came here. Don’t try to talk to the German government or France excuse me, France. You know, it’s very hard unless you’re CC (?) from Binance and they say, I have hung up a million in my back pocket. Do you want to talk to me? Yes, but in Switzerland, it’s very level headed and different things can be tried out. And if something is successful, other cantons start to copy it. So I think it’s a nice approach.
Aliya Das Gupta: [00:25:12] Let’s call you as well. Have worked quite a lot with the government here in Switzerland.
Open Government
Pascal Ihle: [00:25:16] Yeah, I think I think the government is quite is quite open and you can approach them. I think this is I think if you travel between Bern and Zürich, you see the parliamentarians, you see members of the government sitting in the train. And you’re just next to someone from the political field. I think this is quite unique. And and we have different delegations from abroad, just someone from France. And he told me, how does it work? Because even to get number five behind the Ministry of economy in France in Paris, it’s nearly impossible to see them. And here it’s completely a different approach. They’re quite open. And we as a communication agency, we have some projects of this companies from space. And um, when really we have something interesting, something new, we can approach them and just let them present. They’re quite open. Just to give you a very small example, 21Shares, they announced the double unicorn status two weeks ago and they were invited. The founders were invited yesterday by the General Secretary in New York just to have a chat with American and Swiss entrepreneurs. So the people are open. They want to understand. I think this is the openness is probably one of the key factors here in the Swiss political landscape.
Aliya Das Gupta: [00:26:52] Oh, we already have a question from the audience? Yeah, love it.
Switzerland and Liechtenstein
Audience Question: [00:26:55] I want to know your opinion about comparing Switzerland to Liechtenstein in terms of crypto readiness and for being a place for the crypto economy (?).
Aliya Das Gupta: [00:27:07] Repeating it for the livestream as well. The question was about the Swiss ecosystem versus the Liechtenstein one and the approach of regulators in this context. Who would want to take that one?
Alexander E. Brunner: [00:27:19] Interesting. I think this Crypto Valley would have never happened without Liechtenstein, because one of the first banks ever to accept all this crypto stuff was Bank Frick. And so Liechtenstein was sort of helping birth helper in that regard. But I think what you can’t deny is, I mean, Liechtenstein has one advantage to have access to the EU market that is very strong. So some of the companies, you know, Bitcoin Swiss has a Liechtenstein entity to access the EU market, but it’s just a very small country just by potential and talent and it’s hard to live there. So I think I can’t see how in Switzerland on a global scale, if you compare it with the UK, the US is sort of small, smallish. So I think that has always been something that’s been holding them back.
Pascal Ihle: [00:28:07] Just, just to give you an answer, I think what you say is a correct, I think Liechtenstein, was andt is still very important for Switzerland and you have this Top 50 report by PWC (?) and the critical issue for them is Switzerland and Liechtenstein. So the Liechtenstein companies are part of this report. And when I met the two founders of 21Shares, I think three weeks ago here in Zürich, they told me something which is really unique here in Zürich is you have the financial industry, so you have all this knowledge about finance and at the same time you have all these tech companies and the ETH, so you have a huge power, brainpower from the financial and tech side. And I think this is quite useful here.
Audience Question: [00:28:52] But Liechtenstein is it part of the EU?
Marc Degen: [00:28:55] It’s not of the EU but economic area that gives them access.
Audience Question: [00:28:59] Okay.
Big Tech and Crypto
Elvedin Mesic: [00:29:03] Great. Yeah. Thank you so much for the question. So before when you were presenting your slides, we saw a lot of the big tech companies that we all know, especially the big, Google and similar ones. And, as I mentioned at the beginning, it started off also with the, in crypto with the nerds and the geeks, and all the coding. And, we once, when we talked about the topic of communities in that sense we also noticed that it’s not just the normies that sort of normal people who know a little bit about crypto, that have a feeling that crypto is a bit different than the crypto bros that are crypto nerds. It’s also within the tech community that crypto or blockchain in general has a bit of a separate standing. So how do you see the difference in that big tech world as blockchain is also technology in the high tech world, artificial intelligence and these sectors? How do you perceive maybe overall globally, but also especially in Switzerland, the Swiss community or do you think the crypto and blockchain community is considered a bit of a freakish thing or a different thing still?
Alexander E. Brunner: [00:30:23] I can have a start because actually most of the time I’ve worked for different tech companies and for AI companies interestingly as well, the Swedish and American ones. And the interesting bit is that Zürich is a hot spot in AI. For example, Apple bought the face ID company. That’s a Swiss company. When you unlock your phone, that’s the Swiss technology they’ve bought. So Google has more than 5000 employees and researchers here, Meta’s here. Apple is here, Microsoft is here. Disney is here. So thousands more. So I think just by size, AI is much more dominant in Zürich and it’s sort of more established as well. And I think what are you going to see in the future and that’s sort of my big tech approach in a lot of I guess true blockchain believers don’t like it that much I think big tech will start entering this space and make something as scalable, robust and has user friendliness built in and has some other (?), but I think they’re going to start competing in this sector and then we’ll see. I think then Switzerland, Zürich has a good position. We have ETH, we have the developers and we have the crypto or blockchain space and let’s see. So I’m positive that we can bring those communities more together in the future.
Pascal Ihle: [00:31:37] Yes. And you see as well that you have some developers, some nerds from Google who wants to change the site to go to the smaller companies because they have more freedom. They have more possibilities. It’s less institutionalized. I think that’s one point. And the other point is, I think this decentralized ideal, I think, it’s still quite fascinating. It’s less centralized. It’s more different. And I think if you read the first yes, the first manifestos at the beginning in 2015/16, called the Bitcoin manifestos … you’ll see this revolutionary thinking something quite new and I think it is still quite attractive.
The Crypto Community
Elvedin Mesic: [00:32:19] Do we have any follow up questions from the audience? Something specific to this? If not, then I would go just with a short one. Alexander when we talked with you and prepared, you also briefly mentioned what I liked a lot and never consider this the different natures of the different technology communities. If you remember, maybe you want to share with us also … the one more spreading the message very actively and the other ones being just a community.
Alexander E. Brunner: [00:32:49] Sure. As a work in AI, I mean, we were last week at an event at Google, Google invited members of parliament into Zürich. (?) was there as well. And it is a bit about Google is always whenever I ask people what do you do? And they never tell you. And the difference is if you’re developing AI, it’s a trade advantage is trade secret. You don’t want to tell anyone this. That’s your edge. You know, you’re continuously building. And as Pascal mentioned, blockchain is a network. Excuse me, Aliya mentioned that blockchain is a technology that’s a network. So the more people participating in the network, the better for the network. So it feels that crypto is much louder, more dominant. But I told you that as well. Some of you might not like that, but if the Swiss government tomorrow would say we’re going to ban Bitcoin and crypto, it’s just all illegal. Obviously, some of us will be really sad if we lose money or emigrate to somewhere else. But the daily life for my mom, for my wife or my kids would sort of continue. In AI if you banned AI, you could stop all the Tesla cars, your Siri wouldn’t work anymore, your face ID, all sorts of things wouldn’t work anymore. This AI is so dominant … (?), but it has been around much, much longer and one has to acknowledge that as well. So I think you’re not comparing entirely the same technologies.
Aliya Das Gupta: [00:34:19] Oh, a follow up question.
Switzerland, Singapore or Dubai?
Audience Question: [00:34:20] Yeah, I have a question. So quickly, because if you kind of like … (?) in Switzerland, Crypto Valley we did this we did that. But what I hear, I’m working for BitMEX, the exchange and my clients whenever they want to open an office, a new one for wherever they are based, they would open it in Singapore and Dubai. So how do you position yourself or how do you see the growing competition coming from Singapore and Dubai for instance?
Aliya Das Gupta: [00:34:53] For the feed, growing competition from Singapore and Dubai. How is Switzerland going to stay competitive?
Pascal Ihle: [00:34:59] As you’re from BitMEX I think this is a good example because you have some mainstream you have different crypto exchanges now here in Switzerland and there is a worldwide race for the regulation because I think BitMEX is in the Seychelles, the headquarter and this is not, how to say? It’s a nice country, but it’s not the most reliable for the legislation. So everybody’s hoping and coming to Switzerland. That is a race because you have, I think, BitMEX is as well in Singapore and in Switzerland. And so these crypto exchanges are in different places and they’re waiting to get the first regulation and in discussion with this is was responsible of this exchange we realize that one country makes the first regulation gets to race everywhere. I think this is like a competition. And and you saw Ueli Maurer, the finance minister, he told something very, very interesting, I think that counts for (?) Switzerland. We were at the House of Switzerland in Davos in the ice hockey stadium and he took the picture of a hockey game and he said, okay, Switzerland, won first part of the game. And a hockey game is three parts. So we won the first part. But the game continues to last … so the danger is that we are maybe a little bit too satisfied with what we achieved and we don’t look into the future. And you have other legislation like like Dubai or especially Singapore who tries to look a little bit further. And I think if there is an openness of the regulator, it’s going to affect negatively Switzerland. I don’t know how you see that?
Alexander E. Brunner: [00:36:48] I don’t have an opinion on Dubai, because I’ve never been unfortunately. But I was recently in Singapore and recently I don’t know. It’s an interesting title. Recently the regulator 21st, 29th of August, he gave the speech and the speech was yes to digital assets innovation, no to cryptocurrency speculation. And the reason for that is, Three Arrows. I don’t know, you heard about Three Arrows, but they were sort of based in Singapore and they got a lot of heat. And I think when it comes to Singapore, it has a top down approach. But obviously the buck stops at a moment when they feel it’s speculation of Singapore citizens. So I’m not sure if Singapore is across the board more friendly. You know, they’ve become more worried about the reputation of their financial center. And I think one of the … (?) the Swiss system was a bit less retail focused maybe, but more institutional. There’s more institutions coming. So they haven’t been, to my knowledge, any really big exit scams (?). There’ve been a few, but they’re sort of being contained and I think that’s when it comes to different jurisdictions that you I mean I did the first book I wrote, I interviewed the former head of Finma, Mark Branson. He said as a regulator, you have three options, very simple. If something new arises in a financial industry is you either ban it, you say, oh, this is bad, don’t want to have that.
Alexander E. Brunner: [00:38:12] You know, the Chinese now did that and the Indians. The second thing is you just let it run until something bad happens. And then someone screams and says, Oh, you know, this has just happened. Or you try thirdly, to come up with a regulation, so at least Switzerland, with the ICO guidelines and the crypto banks, has been trying. I think there’s still a few gaps. But I think what everyone has been realizing and I also recently talked to an Indian lawyer in India, crypto is banned. Do you think that Indians are not speculating for crypto? They are. So as a regulator you have a problem. But you can say I banned it, but if everyone is using it, you know your job is not done. And if you’re just let everything I think the Americans have for a while this approach, which just let it run and then some something goes wrong, like Celsius (?) and then we whack that someone. I think that’s the American approach. Then you take someone and you whack him and you tell everyone, okay, no, don’t do that. At least Switzerland has tried to a certain extent to create a framework and there’s still bits missing. It’s not perfect. I agree.
Pascal Ihle: [00:39:18] Yes. And I think it’s not easy to understand crypto exchange. I think this is quite it’s from the technological point of view. It’s quite difficult and as well from a financial standpoint. So I think the regulators have to learn and now it’s depending who is learning faster.
What Regulators could do better
Aliya Das Gupta: [00:39:37] Maybe a follow up question from … (?) say. So we constantly celebrate a lot of what’s done and the first quarter, we’ve obviously done quite well. What do you think the regulator hasn’t done well? What do you think they could have done better? And what steps do you think need to be taken to ensure success in quarter two and quarter three.
Pascal Ihle: [00:39:58] Something that Lichtenstein the question of Lichtenstein was quite important. Lichtenstein at the beginning they had a fintech, blockchain desk. So if you were a developer or an entrepreneur and you wasn’t sure about going in that direction or that direction, you could go to the desk and they helped you. For instance, Neuchâtel is doing the same. So if you have concrete questions, they are more on the microelectronic blockchain applications. They have different start ups. That’s very interesting. So they as well, they are trying to help the startups. If you are an entrepreneur and you have some issues or some questions with Finma, just wait a very long time and don’t get (?). And I think this is a little bit frustrating for for some companies because they would like to know can I invest, can’t I invest, do I have to change my business model or some legal framework. And this is a little bit frustrating. I think if we could speed up a little bit, I think that would probably help the blockchain scene a lot.
Alexander E. Brunner: [00:41:03] I’m actually not checking my email. I’m checking a post I just saw today. And I think there’s a big white elephant in the room. And I mentioned it before and it’s the Americans and a contact of mine just publishes he’s an attorney there’s a law case going on in the US concerning Etherium and the SEC is suing an Ian Baleno (?). And in this court case today the SEC said Ethereum is a US entity because there are so many nodes in the US, we are responsible. We feel, read up on that, the Americans are saying Ethereum is ours. If you’re operating on that, we come and watch you. And I think this was two things that are really difficult for regulators and the government about crypto. And one is this decentralized, anonymous nature, you know, these nation states. Speaking as a politician, the first and foremost activity of any state is to identify your citizen so you can tax them. It’s very basic, but it’s key. The Americans also care a lot about tax, so the idea of a decentralized, anonymous network runs very counter to the nation state. And it was meant like that, you know, Bitcoin, Satoshi meant it like that.
Alexander E. Brunner: [00:42:22] So it’s a conundrum for regulators. And the second bit is even the bigger bit is what is a coin? And just watch the Americans. It’s a very entertaining theater. The SEC says only Bitcoin is a security. Now, recently, with the insider trading note, it’s now more they’re also securities now. NFTs are maybe securities and the CFDC (?) says, no, it’s a commodity and this is a security, the problem with algorithms and software is it could be anything of that. If you think about it, if you buy an Apple share and you have it in your wallet, it’s going to be an Apple share tomorrow. It’s not going to be a bond and it’s going to be an Apple share in a week’s time and in two weeks time. With coins, you can program anything. You know, it could be all of that at various points in time. And I think for for regulators, this is very hard to decide what it is. And then you’re in a mess and then you’re always afraid about Americans and we Swiss know a bit how it feels when Americans come after you. It’s not nice.
Aliya Das Gupta: [00:43:23] Do you have a question?
International Crypto Terminology
Audience Question: [00:43:25] Yes, for me as a crypto entrepreneur? What I found really challenging is that every country has different terms and different types of coins. Every country, it can’t even kind of come up with the same terminology, the same definitions of what coins are. So you see there is something going on to kind of harmonize these things globally. So we have clear definitions for the same currency token. What is a payment token, what is a security token, what is a utility token. Or do you think this will stay as it is? Very heterogeneous.
Elvedin Mesic: [00:43:58] Just to recap, everyone heard it. The question is, if you see if our guests see any development in finding the common terminology across even countries and regions on the globe, because everyone is using different terms for the same thing and it makes it hard to navigate through this word jungle.
Alexander E. Brunner: [00:44:19] As … question. Who thinks that the proof of stake merge was a good idea for Ethereum? Okay. There’s someone else thinks it was very good, his name is Gary Gensler of the SEC. Did you read about him? He said, oh, it’s now yielding. Hang on, it’s a security. Read up on that. So it’s coming back to your question. So to us, it’s still ETH is ETH. But now the SEC says, hang on, no, no, no. Now it’s a security. It wasn’t before. So I don’t know. You know, and I think that’s a conundrum and I think it’s not going to go away, it’s software. You can do that now. It’s not going to go away. So it’s an interesting question. I have no answer, but it’s fascinating to watch. Fascinating.
Swiss Crypto Terminology
Elvedin Mesic: [00:45:13] Maybe a follow up question for my side? Do we see that we have in Switzerland a common terminology for things or are we struggling there already within cantonal differences and French, Italian, German, English?
Pascal Ihle: [00:45:30] I think we have a classifications of the tokens. I think this is quite sure in some way. Do you disagree?
Alexander E. Brunner: [00:45:41] I think you have to ask FINMA, I know you go there. I mean, you probably know, it’s interesting, you go with a paper and you explain it to them. They go like, you know, it’s payment or maybe, yeah. It’s difficult.
Audience Question: [00:45:52] So yeah, we went to the lawyers here in Switzerland and different lawyers came up with different things. What it could be, it could be a this, it could be this, could be this. And it’s very simple, in my opinion. It’s a payment token. But so it was complicated with the lawyers here to come to an agreement. And we’re still waiting for them to give us a paper. Obviously, lawyers, they want to make money. So obviously, if they already give you the answer, then that wouldn’t work for them. But in every country, it’s different. We went to Malta first. They have their classifications, what’s called a virtual token or VFA and so many different categories. And there’s nothing globally that harmonizes that. So every country treats it differently, even though it’s the same token. It might be a payment token here, it might be a virtual token in Malta. And that is the challenge as an entrepreneur, how do you run something globally where you don’t want to worry about which country you can’t, you know, it’s one token. You can’t just make it work differently in different countries. And so I find in Switzerland, the classification is clear. Mm hmm. But, you know, the lawyer is still discussing.
Alexander E. Brunner: [00:47:02] And I think, in essence, that I’m really happy to hear from anyone else, but I think it will not go away. It’s a conundrum of the entire thing because, you know, I’ve never went abroad and wanted to pay with Swiss Francs. And someone said, no, this is not Swiss Francs. This is yeah, this is a bond, as I know everyone agrees on that. But in the coins, you know, and you can programme it any way you want, it could be all of those things that are or the community with the merge decides now it’s something different in the future. And then you go back to the regular. I think last year, every year I’m invited to the OECD (Global) Blockchain for the next one, coming up next week. And they talked about that. The regulators said we don’t know what it is and we even don’t know how to find out what it is. And even if you show us, imagine, even if you show the code to the regulators, like I don’t know what to do with that. You know, it’s like you explain to me and then I think it’s a payment token. But a lawyer comes and says, no, it’s a bond or it’s a yielding instrument. I don’t know.
Pascal Ihle: [00:48:04] Stop, you’re depressing him.
Aliya Das Gupta: [00:48:08] I think it’s kind of one of those things that we’re looking at a global solution for something that is decentralized but is divided up by the legislation of different nation states. And these two things are fundamentally not like they’re discontinuous in a way. Right? But I mean, again, like we saying that in Switzerland, maybe we have some kind of similar nomenclature. But I think even just between Zürich and Geneva, we see quite a big difference in the crypto community in the way that I mean, how many startups do we see in Zug and Zürich versus Geneva or if you look at, for example, what happened with Facebook’s wonderful project, Libra.
Pascal Ihle: [00:48:49] Maybe, maybe the distinction between Geneva and Zug. There was a kind of a policy. It was a cultural policy disagreement in a certain way. When Zug celebrated the ICO hype, you had Lamborghinis, you had really all this policy. It was like the alchemists. They thought they could make gold of nothing. And and I think Geneva said, okay, we have nothing to do with it. So we are quite more serious. We are (?) projects. Here in Zug are dreams in Geneva we are working with the commodity and the financial sectors and we are trying to do real projects. So that was a little bit the disagreement and now it changed because I think that the first crypto winter was quite good because all this, these very strange or some of the very strange projects went away. So only the solid one remained. And now Geneva and Zug are fine in each of (…) the Libra case is quite interesting why they came to Geneva. First of all, what the founder of this project Marcus was studying in Geneva, he knew it.
Pascal Ihle: [00:50:07] And they wanted to really do a very classical, I would say, a Swiss project. They came here because of the regulation. Everything and so on. And as Alexander told before, I think it’s a tax issue. And the Americans were quite afraid of everything. And I heard that there was a delegation of American parliamentarians who came to Switzerland. They visited Bern, they visited Geneva, and they showed everything. And after this visit, some of the congressmen phoned to Swiss parliamentarians and said: We are exactly looking what’s happening and if this is a wrong step (?), so there will be consequences. So there was quite a lot of pressure against this project from the United States. And besides that, there were also disagreements of these companies being part of this consortium, Libra. But I think the pressure from the United States was quite huge. And they didn’t want that this project was in Switzerland. They were afraid of the consequences of this kind of view of tokens (?). So, yes, the result was that it vanished.
Aliya Das Gupta: [00:51:24] It changed its name and moved back to San Francisco.
Pascal Ihle: [00:51:27] So I think we just I think this is what Alexander told. I think at the end it’s as well economical policy. I just heard at the beginning of the week or it was last week that Biden and Musk they found an agreement just to build the new Tesla cars not in Berlin but in the United States. So I think this is all economical policy behind that. And if they really see that this crypto space is generating a lot of money and a lot of jobs and so on. So (?) thing that it goes to (?) country.
Alexander E. Brunner: [00:52:10] The interesting bit, I don’t know. I think it’s really worthwhile if you want to learn a bit how the Americans think, read the framework from the White House, which is just a framework. It’s not the law yet. There’s not. But one of the things that is clear in there, they want to retain the financial leadership. So the good news in that is crypto and digital assets will not disappear. But I think the Americans want to have a say in it and in the same paper what they also said and the reason is that their leading technology firms are all US and they basically want to retain that in the financial industry. And and that’s what we are going to see in the future. So I think for for for better or worse, the Americans will sort of imprint their signature on the industry. At what point is it not a question? I mean, they their mission was to have a stablecoin regulation this year until Janet Yellen intervened. So let’s see what’s going to happen after this executive order. But, you know, it’s a tricky thing even for the Americans. And you can just as I mentioned before, the SEC and CFTC are haggling about terms and who’s responsible. Obviously, that makes it difficult.
Elvedin Mesic: [00:53:21] We have one question from the audience, maybe real quick.
Crypto Adoption in Switzerland
Audience Question: [00:53:25] Yeah. I was wondering, with regards to adoption, you mentioned earlier, do we know how many citizens in Switzerland own crypto, or?
Alexander E. Brunner: [00:53:36] I saw once a number, I don’t know. I saw a number and it’s quite high. It was a surprising high that Americans also publish as part of this executive order that they published how many Americans, but on top of mind I don’t know. I think it’s a lot of wealthy people just dabbled in it, I guess. But then the question to me is to use is that adoption or just by buying a coin and holding it. Yes, that’s the first step. But it being used in daily life that would be the next step of adoption, you know. And there have been experiments in Zug, you can still pay taxes or used to be able. I once was about one half years ago, I asked the mayor, is anyone paying taxes? He said, no one pays taxes (in crypto). I don’t know. Maybe people with Bitcoin don’t want to pay taxes or whatever reason is. But I think adoption coming back to my statement before, you know, between owning a coin or holding it in the wallet and actually having it as something useful to transact or buy, you know, some of you might have bought an NFT, maybe that’s adoption. But I think the adoption question is still to be answered.
Elvedin Mesic: [00:54:45] To be respectful of the time and, and Alexander also has to go to another meeting, maybe we just close with some last remarks from Pascal and Alexander just on the community, Switzerland or whatever your message.
Pascal Ihle: [00:54:59] Just continue. I think that’s the most important, believe and continue, especially you, don’t give up, continue, continue.
Marc Degen: [00:55:11] And I think what I showed in the presentation, the companies are coming and Switzerland has a very good framework and has a good ecosystem. Is it perfect? No. What’s going to happen when Americans come up with a framework? We’ll see. But in the meantime, this is a good way to establish a business and you have a lot of knowledge of people here, including lawyers, even though they don’t get perfect answer. But I think you’d be hard pressed to find a good crypto lawyer in France, I would say. You know, you’ll find more here.
Fast Adaption in Switzerland
Pascal Ihle: [00:55:40] Maybe one very last word from my side. Now, I think one advantage of Switzerland is, that it’s a country who can adapt very fast to different situations. In the history of Switzerland you see that it’s not very … in a certain way it’s innovative, but if it has to change it’s always from the pressure from outside and then it finds very quickly very good and strong solution. That’s the first observation. And the second one is 33 years ago, the Internet was created in Switzerland at CERN, the World Wide Web. And what’s extremely shameful is that the commercialization of the Internet was not done in Switzerland nor in Europe, but the United States. And I think that today the especially the regulator, the politicians see that with all these tech companies, these different tech clusters, the drones, very successful, AI and blockchain, we have really big opportunity here. And if I hear that the two founders of 21Shares, they say, we want to build the next Google and the Amazon of Web 3.0 here in Switzerland. So these are quiet, how to say, strong comments and strong statements. And I think Switzerland has realized that with these tech clusters and tech companies, it has a big potential. So I think the regulators and politicians will be quite open to all this development.
Elvedin Mesic: [00:57:17] So thank you so much for these great last notes. Please, a very big applause for Pascal and Alexander. Thank you very, very much for being our guest tonight. And we hope to see you again on the stage. For everyone else, you can now, we now have a small apéro we can for this even go up to the terrace. So we’ll go through the left door. We will go one floor up and enter the beautiful terrace that faces over the yard. Maybe bring a jacket, but you can also leave your stuff here. It is all closed and hope to have wonderful conversations with you about anything blockchain related. Thank you so much again. Alexander and Pascale.
Aliya Das Gupta: [00:58:04] Thank you guys.
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