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“…Switzerland’s famous banking secrecy is falling to a global assault on money-laundering and tax evasion. But financial security remains in demand. The country should seek to become the “crypto-nation”, said the economy minister, Johann Schneider-Ammann, last month. Zug aims to be the capital of that nation.
To that end, Switzerland is maintaining loose rules for crypto-businesses, even as other countries are tightening theirs.

An industry is developing to store tangible crypto-assets, such as the hard drives on which cryptographic keys are stored, offline in cold, dry, secret sites complete with rapid-response teams. Where better than a decommissioned military bunker in the Swiss Alps? In Zug, friendliness to crypto-currencies is in evidence all around. “Bitcoin accepted here” stickers adorn the city hall and several shops, including the wine merchant’s. In 2016 Zug became the first place in the world to accept bitcoin for some public services. Residents can get a blockchain-based digital identity.
About a quarter of last year’s global total of $5bn in initial coin offerings (ICOs, a form of crowdfunding whereby investors are issued with digital tokens) was raised in Switzerland, estimates PwC, a consultancy. Of the ten largest ICOs, four were in part based in Zug.
The town decided early on to attract crypto-entrepreneurs, for example by allowing companies to incorporate based on bitcoin wealth, rather than insisting that it be converted into fiat currency. Taxes have long been low. After the second world war the former fishing village cut its corporate-tax rate to 8.5%. The rate is still competitive, at 14.6% compared with Zurich’s 21%...’’

Snowball effect 

“…Regulators elsewhere see it as their job to protect consumers from dubious new crypto-currencies. But Switzerland’s take a more bracing approach. “Our consumers should have the freedom to invest in exotic instruments, even gamble,” says one official. Jörg Gasser, the state secretary for international finance, has little doubt that, if and when the bitcoin bubble bursts, investors will ask for regulation. But, he says, the sector must not be regulated to death.

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That does not mean anything goes. His priority, says Mr Gasser, is to protect the integrity of Switzerland as a financial centre. The national regulator, FINMA, is investigating several ICOs for possible breaches of regulations, including anti-money laundering rules. On February 16th it issued guidance on how it would apply existing market legislation, and warned that some tokens would be treated as securities and have to follow stricter rules. A working group has been assembled to look at which rules, if any, ought to apply to ICOs. The aim is to increase legal certainty and ensure that, in the words of a press release from the State Secretariat for International Finance, a government department, “Switzerland remains an attractive location in this area...’’

The article was originally published on The Economist.