Banking & Fintech

The Swiss banking world tries to reinvent itself

Rarely has a business proposal raised so many expectations and outrage. Facebook’s proposed cryptocurrency, Libra, promises to transform the way money flows across the globe.

This content was published on March 10, 2020 - 13:44
Skizzomat (Illustration)

The plan, spearheaded by a Facebook-led consortium in Geneva, Switzerland, has attracted global scrutiny. 

In Switzerland, it has led to soul-searching. The country’s storied banking sector sees itself at risk of being uprooted by new forms of digital currencies that circumvent traditional money flows.  They also see great promise: could digital currencies lead to a revival of personal banking, allowing a greater number of people access to more efficient financial services? 

Not so fast, states a Swiss government study. Even if issued by the central bank, a digital currency for the general public would “bring no additional benefits for Switzerland at present. Instead, it would give rise to new risks, especially with regard to financial stability.” 

The rapidly evolving cryptocurrency and blockchain industry in Switzerland sees things differently. There is a profusion of groups that promote cryptocurrencies and many projects are dedicated to integrating the new digital technology into the traditional financial world. 

Switzerland has a lot to gain – and to lose – from the way in which this is done. The country manages more than $2.3 trillion in offshore wealth, more than any other nation, according to the Boston Consulting Group. That equals a third of estimated known overseas assets globally. But it also matters for Switzerland. About 10% of the country’s economic output comes from the financial sector.  

Lawmakers and regulators are playing their part in trying to shape a transition that many people think is inevitable – with or without Libra. If that chance is missed, some fear it would disrupt Switzerland’s place in global finance, with digital assets flowing to other countries. 

Consumers paying for goods is only one part of the jigsaw: digital currencies are also tipped to transform trading, the way companies raise fresh capital and how investments are packaged and sold. 

With this in mind, Switzerland wants to update its banking, company and financial market infrastructure laws.  The financial regulator frequently spars with the crypto upstart community on how to protect small investors in the promised new world of digital finance. It has also awarded licenses to financial players specializing in crypto assets. 

What these actors agree on is however that Switzerland needs to be a global leader in the crypto and blockchain spheres. Several hundred start-ups are backed by incubators, consultants and legal teams. The country is also home to specialist foundations that house the significant assets of some of the world’s leading blockchain projects. 

I have been closely following the emergence of this scene over the last years. Subscribe to my newsletter to keep in touch on latest developments. 

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