Navigation

Skiplink Navigation

Main Features

Live blog

Fintech analysis

Matthew Allen takes a look at the issues and talking points surrounding the fintech frenzy in Switzerland.

By

Content on the live blog

The following content on this topic was first reported or is still being reported live. You will find the latest stories first. Then follow the timeline backwards.

Vayloyan annointedSwiss crypto exchange nets big hitter CEO

arthur Vayloyan

Arthur Vayloyan has crypto experience in the mainstream banking sector

(Keystone)

Former Credit Suisse and Falcon Bank executive Arthur Vayloyan has been named co-CEO at Bitcoin Suisse, one of Switzerland’s oldest cryptocurrencies exchanges. Bitcoin Suisse has been at the forefront of the initial coin offering (ICO) boom in Switzerland in recent months.

Vayloyan landed the job just a few weeks after leaving his post as Global Head of Products & Services at Falcon. His departure followed a top-flight clear-out at Falcon that saw CEO Walter Berchtold and chairman Christian Wenger depart under a cloud in September.

Falcon has recently moved into the cryptocurrency space. In July, it became the first Swiss bank to offer customers crypto investments by teaming up with Bitcoin Suisse, which conducts transactions on behalf of Falcon.

Bitcoin Suisse founder and CEO Niklas Nikolajsen will now share operational duties with Vayloyan as co-CEO, combined with his role as chairman of the board at the exchange he set up in 2013. In a statement on Monday, Nikolajsen said he and Vayloyan “discovered our shared enthusiasm for the potential of blockchain technology” when setting up the Falcon project.  “I am very excited to work with Arthur on the future of our firm and to unleash the potential of crypto-asset-management.”

The crypto debate

Along with Bity in Neuchatel, Bitcoin Suisse has been a pioneer of the nascent, yet growing, cryptocurrency industry in Switzerland.

Falcon - along with Swissquote, Vontobel and Cornèr – have lately become among the few Swiss financial institutions to actively dabble in cryptocurrencies. Other established brands have left the new digital financial system well alone, and in some cases spoken out against potential bubble and fraud risks associated with cryptocurrencies such as bitcoin.

However, Vayloyan disagrees. “Crypto-finance, crypto-assets and tokenization will most certainly have a great role to play in the future of finance, wealth management and private equity,” he said in the statement. For a short time, he also linked to the now-ailing Monetas blockchain payments project in an advisory capacity.

Berlin foundationRival countries to test Swiss ICO dominance?

IOTA Foundation logo
(IOTA Foundation)

Has Germany emerged as a rival to the booming Swiss model of ICO foundations? The creation of the IOTA hybrid foundation in Berlin - the first such structure in Germany - appears just as things are looking shaky in Switzerland with the Tezos foundation governance row in full swing.

“It may seem counter-intuitive to go through the painful process of becoming a regulated non-profit entity in Germany, especially when considering ‘easier’ alternative options in other jurisdictions,” IOTA stated. “But subjecting ourselves to the onerous oversight of one of the world’s most respected governments, within the heart of the EU, will give IOTA an unparalleled legitimacy.”

“Standing on solid legal pillars” is considered by some to be crucial for persuading big hitters, in such fields as mobility, health, industry and energy, to incorporate IOTA technology into their future strategy - particularly with the EU’s financial regulator (ESMA) paying critical attention to the ICO scene.

“ESMA has observed a rapid growth in ICOs globally and in Europe and is concerned that investors may be unaware of the high risks that they are taking when investing in ICOs. Additionally, ESMA is concerned that firms involved in ICOs may conduct their activities without complying with relevant applicable EU legislation,” the regulator stated this month.

The IOTA Foundation fund will spend the “tens of millions of dollars” at its disposal developing the system further. The foundation will also award grants from a $10 million Ecosystem Fund to promising projects that use its technology.

IOTA’s open source technology is designed for secure communications and payments on the internet of things. The unique ‘Tangle’ distributed ledger system is already being used by some companies, including Bosch. 

Singapore ICO interest

Since the creation of the Ethereum Foundation in 2014, Switzerland (in particular canton Zug) has cornered the market in the ICO foundation ‘industry’ – thanks in large part to its low taxes and light touch regulations. Such entities – usually reserved for charities and NGOs – have absorbed around a quarter of the $3 billion+ raised globally by ICOs so far this year. Their popularity may even have been boosted by restrictive measures taken against ICOs in the US, China and South Korea.

But the success of Swiss ICO foundations has also raised eyebrows – and concerns in some quarters that using such structures to house stockpiles of crypto-tokens from start-ups may be circumventing their original intention. 

Such concerns have only been stoked by the Swiss regulator recently launching a probe into ICOs and a public bitter spat at the Tezos Foundation.

So could Germany offer a more legally robust foundation model than “other jurisdictions” – as suggested by IOTA? Singapore is also casting a somewhat cautious eye at encouraging “the right kind” of ICO to set up in its jurisdiction.

The Monetary Authority of Singapore financial regulator told the Financial Times this week that it will set up a regulatory sandbox to test out the viability of the new form of crowdfunding. Indeed, Singapore is “very keen” to attract such enterprise – providing such ventures play by the rules.

Future exodus?Banking heavyweights jump ship to fintech

A hand using a tablet for online banking

Digital banking is providing a fertile ground for fintech start-ups

(Keystone)

Marco Abele is one of a growing number of finance professionals to leave a cushy job in the traditional banking world to try his hand at fintech. What makes him a bit different is the high-ranking role he left behind: Chief Digital Officer at Credit Suisse.

Abele has founded the Tend start-up to better allow passion investors to indulge in their luxury desires. 

He follows Oliver Bussmann, former Chief Information Officer at UBS and now head of his own consultancy and President of the Crypto Valley Association, as a big-name defection to the choppier waters of fintech.

“A lot of senior and very experienced banking managers are thinking: ‘Let me go out and try it’,” Abele told swissinfo.ch. “Ten years ago, that was unthinkable, but now we have a very nice environment where they can try their luck. They want to live a more purposeful life. They don’t want to work just for money anymore, they want more fulfilment.”

External Content

Table showing bankers who have moved into fintech

From traditional banking to fintech

Part of the appeal of fintech is the feeling that a new idea could have a profound impact in a short period of time.

Another attraction is escaping the constraints of the slow-moving, highly structured environment of big banks – some of whom may be fearful of perceived negative regulatory consequences of moving outside their comfort zone. 

Hardly any Swiss bank will have anything to do with cryptocurrencies, for example. Credit Suisse CEO Tidjane Thiam recently called bitcoin the “very definition of a bubble”. He added: “Most banks in the current state of regulation have little or no appetite to get involved in a currency which has such anti-money laundering challenges.”

Fintechs are hiring from both the worlds of technology and finance at paceexternal link. And Abele thinks they will attract more big names from established banks: “There will be more to follow, I am sure.”

Financial complianceUS IT firm takes over Swiss regtech champion Qumram

A bank trading room

The rise of digital banking has led to compliance challenges that fintechs are solving

(Keystone)

Big news in the Swiss regtech universe. Qumram – one of the hottest names in this space – has been taken over by United States digital monitoring and diagnostics firm Dynatrace for an undisclosed amount.

Set up in 2011, Qumram specializes in monitoring digital traffic between financial services companies and their clients. Many banks have set up digital platforms that replace the paper trail of documents detailing the way they transact with their customers.

Qumram technology is able to trace digital interactions, including those conducted through social media channels, such as Whatsapp and Linkedin. This is an important requirement for banks to comply with customer protection regulations. Such rules are set to be enhanced in Switzerland, keeping in step with the European Union’s MIFID II legislation.

Regtech is one of the hottest areas in fintech, addressing the compliance needs of financial institutions in the new digital era. Several start-ups have sprung up in Switzerland combining artificial intelligence and big data capabilities to help banks negotiate customer protection, risk management, anti-money laundering and Know Your Customer (KYC) regulatory hurdles.

The Zurich-headquartered Qumram (now owned by the Boston-based Dynatrace) developes most of its IT in Barcelona. In a statement on Friday, Dynatrace said it plans to double that engineering team next year.

“Dynatrace is unique in its ability to not only monitor highly complex digital ecosystems, but see every user transaction. In addition, their AI-powered analytics is amazing,” former Qumram CEO Patrick Barnert said in the statement. 

Speaking to swissinfo.ch Barnert said he would assume a new role as head of a “Global Partner” group run from Switzerland. His Swiss-based team, which until now performed management and customer services functions for Qumram, will now re-focus on servicing and building up global partners within the Dynatrace group.

Dynatrace, which traces its roots to an Austrian firm set up in 2005, has a significant research and development unit in Linz, Austria.

Crypto cryptSwiss nuclear bunker stores bitcoin hoard

In the age of cyber attackers and digital fraud, where do you put your hard-earned bitcoins to keep them safe? In a nuclear bunker carved into the Swiss Alps it would seem.

A reporter from the US news portal Quartz shot this video of a bunker in canton Uri, run by Zug-based crypto firm Xapo.

External Content

A former nuclear bunker that now houses cryptocurrencies

This might seem a bit overkill, but not if you consider the current global value of cryptocurrencies. That stands at around $172 billion (CHF171 billion) for the 100 top tokens, according to CoinMarketCap.comexternal link.

Bitcoin, the world's first cryptocurrency, is by far the most successful. A single bitcoin will currently set you back nearly $6,000. All combined, the total value of bitcoins in circulation is just shy of $100 billion.

Xapo's Uri bunker contains customer crypto assets worth "several million" according to the reporter.

Decommissioned Swiss nuclear bunkers, a relic from the Cold War, have been sold off for a variety of new uses - from tourism to data security.

Oct 2017

ICO rowTezos Foundation faces legal onslaught

In the latest twist to the Tezos Foundation spat, lawyers in the United States are putting together class-action lawsuits on behalf of disgruntled investors. The PR disaster for the crypto ICO continues.

Here is what one lawyer has to say...



.

Governance rowTezos Foundation rift sends out seismic ripples

Fireworks over Zug

The Tezos Foundation fireworks are not as pretty as others to be seen in Zug

(Keystone)

The meteoric rise of Swiss involvement in the initial coin offering (ICO) boom has encountered further turbulence with a serious governance spat at the Tezos Foundationexternal link

The public fall-out between the Tezos project’s founders, Arthur and Kathleen Breitman, and Johann Gevers, the president of the foundation created to spend the vast sums raised from the public in the summer, will make some already wary people even more nervous.

On Wednesday, the Breitmans published a damning attack on a perceived lack of activity by the Tezos Foundation, accusing its managers of falling behind schedule in implementing the building blocks for the cryptocurrency.

But more damagingly, the statementexternal link accuses Gevers of “an attempt at self-dealing, misrepresenting to the council the value of a bonus he attempted to grant himself.” Gevers has been suspended with the Breitmans baying for his permament removal from the foundation. In the statement, entitled “The Path Forward”, the Breitmans heavily hint at a more hands on role for themselves at the foundation.

Gevers has rejected the allegation, telling Reuters the attack is an “illegal coup” fuelled by “character assassination” and “outright lies”.

Scandal unwelcome

Whatever the outcome of the dispute, the Swiss crytptoasset community will be alarmed by more negative publicity. Last month, the Swiss financial regulator (Finma) closed down a crypto scam, whilst investigating 11 other cases, and soon after said it was probing the whole ICO business in Switzerland.

Organisations such as the Crypto Valley Associationexternal link have been working on a code of self-regulation for the ICO industry that has brought some $600 million into the coffers of Swiss-based foundations. “The rapid development of token launches has raised concerns around stability and security, and as a leader in this field, it’s our responsibility to support the industry,” statedexternal link president Oliver Bussmann.

The last thing the crypto community wants to see are the size 12 boots of regulators trampling all over the lawn. A potential legal and regulatory battle over the Tezos Foundation would hardly suit this purpose. 

Finma and the Swiss Foundation Supervisory Authority in Bern are remaining tight-lipped about their intentions towards the Tezos Foundation. But the sums involved are hardly trifling. In July, shortly after the ICO that raised $230 million in a matter of days, the foundation said it held $220 millionexternal link worth of cryptocurrencies. According to Reuters, that figure has swelled to more than $400 million as the value of bitcoin and ether soared in the intervening months.

Peace of mind?

The Tezos ICO specifically did not guarantee any financial return, but nevertheless, should the project collapse or become impaired as a result of the row, there could be a lot of angry investors. Bloomberg has reported that the value of the Tezos tokens (Tezzies) has slumped dramatically in the last couple of days.

And then there is a credibility issue that has been raised on social media platforms dedicated to the crypto crowd. The whole point of creating a foundation to spend funds raised from ICOs is to create a legal barrier the cash and the project founders. This is to give investors peace of mind that their investment will be spent on creating the technology rather than lining the pockets of individuals.

The Breitmans insist that their proposed new roles will not damage the independence of the foundation, nor enrich themselves. The reaction from investors may not be quite so assured.

Tezosexternal link bills itself as the next generation of cryptocurrency, able to perform self-amending smart contracts on blockchainexternal link.

Crypto learningUniversity 'walks the walk' with bitcoin payments

A student in robes and mortar board is thrown up in the air by colleagues

Students will be keen to learn how much higher cryptocurrencies can rise

(Keystone)

For students with a few bitcoin to rub together, Lucerne’s University of Applied Sciences and Arts might be the place to study. The university has started accepting the cryptocurrencyexternal link as a means of paying tuition fees.

The transactions will be handled by Zug-based crypto trading platform Bitcoin Suisseexternal link, which has agreed to absorb exchange rate losses and currency fluctuations. Students will pay a 1% transaction fee to further insulate the university form such losses.

Situated close to Zug’s Crypto Valley, the university is chiseling out a niche for fintech researchexternal link. It is also a member of the Crypto Valley Associationexternal link that is positioning the central Swiss region as a global hub for fintech and cryptocurrency activity.

Among other initiatives, the non-profit group is beating the drum for “initial coin offerings” (ICOs) in the region – plus a drive to self-regulateexternal link the sector.

Lucerne is not the first university in the world to accept bitcoin payments – there are others in the United States, Britain and Cyprus. Nor is it the first Swiss institution to open its arms to the cryptocurrency.

Zug council accepts some payments for services in bitcoin (more than 40 residents have taken advantage at the last count). The town of Chiasso, in canton Ticino, followed Zug’s example this year. Business services firm Ernst & Young also accepts some bitcoin payments in Switzerland, while Swiss Federal Railways allows customers to buy bitcoin from some ticket machines.

Such initiatives have been written off in certain quarters as gimmicks, designed purely to cash in on the current rampant publicity surrounding cryptocurrencies. But others argue that it makes complete sense for companies with an active interest in crypto not just to talk the talk but also walk the walk. It’s only by encouraging more use of crypto that it can get off the ground.

How far off the ground bitcoin will fly is also a matter of opinion. The value of bitcoin and other cryptocurrencies has soared in the last 12 months. Is this a sign that crypto has matured to point of mainstream acceptance or does it point to an empty bubble about the burst – a view espoused recently by JP Morgan boss Jamie Dimon and UBS chairman Axel Weber.

Like some other parties in Switzerland, Lucerne’s University of Applied Sciences and Arts appears to be hedging its bets a bit – engaging with bitcoin behind the protective screen of a third party. Crypto watchers, like myself, will be watching to see how that pans out.

Oct, 2017

Fintech hubConservative Swiss seek fintech niche

The town of Zug framed by mountains

The central Swiss town of Zug hosts Switzerland's Crypto Valley

(Keystone)

Having arrived to the party fashionably late (as per tradition), Switzerland is now positioning itself as a leading fintech hub. Welcome to the global party. 

There's certainly enough of the pie to go around and it makes perfect sense to have a range of interconnected jurisdictions driving forward the digital finance revolution. But what will differentiate fintech Switzerland from Singapore, London, Berlin or Silicon Valley?

To a large extent, Swiss firms will use fintech to both improve its strengths and tackle some ongoing challenges. There are already plenty of examples of start-ups - both cooperating with and disrupting - the wealth management, asset management and insurance sectors. Established companies in these industries are to a greater or lesser extent working out their own in-house fintech strategies. Regtech solutions also promise to save time and money for institutions bogged down in the regulatory red-tape of AML, KYC, 2B2F etc.

Beyond pure finance, blockchain also has potential to bring huge efficiencies to the commodities trading business (massive in Switzerland).

So who's the new kid on the Swiss block? Cryptocurrencies - not that Switzerland's inventing the stuff, but lawyers, accountants and consultants are cashing in on the crowdfunding ICO craze. Where do you put all the multi-millions you raise in an afternoon? A Swiss foundation, of course. Something like a quarter of the $1.5 billion+ raised by ICO globally this year is being shifted to foundations - mainly in canton Zug.

Mindset crucial

How can Switzerland extract more value from the fintech revolution? By attracting more basic research, according to Crypto Valley President Oliver Bussmann. In future, Crypto Valley will be inviting researchers and academics to conferences along with start-ups and money men. The theory goes that if the nucleus of the next big thing can be worked out in Switzerland then it increases the chances of the project staying here when it takes off.

But it might take more than that - something along the lines of a fundamental shift of conservative Swiss thinking, according to David Siegel, the driving force behind the Pillar Project. Siegel will shortly move Pillar Project to a London HQ, which is apparently better placed to host such a creative and ambitious disruptor. It seems the Swiss have trouble with a “company” that lacks shareholders, a board of directors and an obvious chairman.

Back to those ICO piggy banks in Zug, such as Ethereum Foundation, Bprotocol and Tezos Foundation. They are (or will soon be) distributing the funds to develop projects and turn dreams into reality. The fear is that precious little will stay in Switzerland – instead, being spent abroad.

Having arrived fashionably late to the party, is Switzerland wearing the right fancy dress costume?

Breadwallet seems to think so. It's setting up its global HQ here. “Switzerland has emerged as a hotbed of digital currency startup activity, and we were attracted by its leadership in conservative financial legislation,” says CEO Adam Traidman. “Its strong reputation for financial privacy for consumers is the ideal fit for our charter to empower individuals with the benefits of bitcoin.”

So for some, Swiss conservatism is an attraction, while it's a turn-off for others. Let's see where this leads us....

UPDATE: It looks like the Swiss government has taken noticeexternal link of this inflexible company regulation gripe. Interesting.

Sept, 2017

Global reachSwiss fintech spreads its wings

An antique large globe

Switzerland wants to join the dots with other global fintech hubs

(Keystone)

For a few years now, Switzerland has been establishing a domestic base for an expanding fintech scene. Now the alpine state wants to go global by forging key tie-ups with other global hubs.

A few days ago, Switzerland and Israel announced they wanted to deepen financial sector cooperationexternal link, including the fintech sector. The financial regulators of both countries will swap notes on emerging fintech trends and how these technologies affect regulation.

Swiss Finance Minister Ueli Maurer has previously stated his desire to share fintech know-how with Singapore, on a visit to the island state. The Swiss Finance + Technology Association followed this up by signing a memorandum of understanding with the Singapore Fintech Association to foster greater cooperationexternal link.

Swiss fintech has also been busy establishing collaboration with Russia. Crypto Valley co-founder Søren Fog - and founder of blockchain Company iprotus - is reportedly discussing the creation of a joint Swiss-Russian Center of Competences in Blockchainexternal link.

And having kicked off in Zug, Crypto Valley is also looking hard at establishing a global network of Labsexternal link - tailor made working spaces for fintech start-ups. London, Hong Kong, New York, Paris, Dubai, Singapore, Amsterdam, New York and Tokyo - the Crypto Valley community has been invited to vote on where new labs will be set up in the next two years.

July, 2017

Raising cashWho says ICOs will crowd out VC sugar daddies?

Uncle Scrooge McDuck jumps into a pile of money

It's not all about money, but also expertise, say venture capitalists

(Keystone)

Venture capitalism is dead. Long live initial coin offerings (ICOs)! In June, the crowdfunding phenomenon, for the first time, raised more cash for crypto and blockchain start-ups than VC seed capitalexternal link. So that proves it.

Hang on a minute, perhaps not so. A couple of crypto conferences in Zurich last week had the VCs fighting back. The smarter funds are determined not to be crowded out by ICOs that have raised more than $1.6 billion so far this year.

There is a general recognition that the standard VC model has to adapt, but a refusal to accept that it is irrevocably broken. Throw money at a start-up, sit back and wait for the returns to start flowing without offering anything else? That’s what ICOs do…

Here’s what a few prominent VCs had to say an ICO Summit in Zurichexternal link.

For a start, VCs are better placed than the person on the street to filter the few decent start-ups from the general detritus, said Miko Matsumura from Pantera Capital. Pantera has $100 million set aside to invest in the new wave of tech start-ups, making the fund “exceedingly bullish” on ICOs, Matsumura said.

But, he added: “At the moment ICOs seem to be an attempt to prematurely decentralize Silicon Valley venture capital without solving the problem of trust at a distance. With that problem we have a market that is probably about 90% bullshit and actually less than 10% quality. The deal flow has gone through the roof and it’s insane how many ICOs there are.”

Wild West

Matsumura is also among the VCs attempting to bring structure and order to the ICO Wild West – starting with a self-regulation projectexternal link designed to establish trust before things start breaking down and bringing state regulators crashing down China style on the sector’s head.

Jamie Burke, founder and CEO of Outlier Ventures, pointed out that there is more to venture capitalism than capital.

“People don’t come to us for money. They can raise more money than we have in our fund in 30 minutes. What they want is someone to help them navigate this space,” he said. “We are building the foundations for the next digital economy. What communities need is guidance on how to structure these things.”

And here’s what Richard Muirhead of Open Ocean had to say: “The art of great VC investing needs to be as finely tuned as possible for this next era, and not get distracted by the quick riches of early liquidity.” In other words, avoid the mistake being committed by Joe and Josephine Public right now.

IPO, ICO...now GPO

On Thursday, at yet another Zurich conference on ICOsexternal link, I spoke to Jeff Stewart of Urgent VC. Jeff has a bee in his bonnet. He is not specifically concerned about the state of venture capitalism, but he is miffed at the state of the capital markets in general – particularly in the United States. He contends that the US stock markets are no longer the place for tech companies to list and gain access to growth capital. That’s because they are broken, he insists.

So Urgent VC has an urgent mission – to invest in promising Silicon Valley tech start-ups and guide them towards global listings. Let’s get away from Nasdaq and find larger, more reliable and more flexible pools of capital in other parts of the world, particularly Asia, he says.

According to Jeff’s vision global IPOs will become the norm, coupled with global ICOs that break down the geographical walls fencing off capital pools. His vision comes in three stages: young tech companies will undertake global public offerings (GPOs), listing wherever there is willing capital. 

Many companies will also create tokens, so we will have IPOs and ICOs running side by side on a global scale. Eventually, the two means of raising capital will merge and become indistinguishable, creating a new means of capital raising that will work on a higher plane than jurisdictional stock exchanges.


Timeline navigation of the live blog

The following navigation lists all stories related to this live blog. Click on a link to go directly to a corresponding story.