A Look at Switzerland’s Booming Digital Asset Ecosystem

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In recent years, Switzerland’s blockchain and digital asset ecosystem has matured rapidly and grown into one of the world’s leading blockchain hubs, a position that’s asserted by its expanding workforce and a rising number of foreign companies setting up operations locally.

A report by Home of Blockchain.swiss, a new public-private promotion initiative for the Swiss blockchain industry, looks at the state of the Swiss digital asset market, sharing findings from a survey of 47 industry participants to extract critical insights.

The report highlights Switzerland’s strength in the digital asset market, noting that several high-profile international digital asset startups have recently set foot in the country.

FTX, a cryptocurrency exchange and derivatives trading platform valued US$32 billion, established its European headquarters in Switzerland earlier this year after acquiring local startup Digital Assets.

BitMEX, another crypto exchange and derivatives trading platform, announced in October 2021 its expansion into Switzerland, unveiling the forthcoming launch of a digital asset brokerage service called BitMEX Link. The company cited Switzerland’s status as a “regional hotspot for great talent,” its growing blockchain ecosystem and its advanced institutional framework as the main reasons why it chose the country to host its new office.

And Fireblocks, an institutional digital asset custody, transfer and settlement platform from New York, opened an office in Switzerland in September 2021 to expand its presence in the German, Austrian and Swiss (DACH) market and address the increase in demand from financial institutions.

In addition to international digital asset companies setting foot in Switzerland, the report also notes the increasing number of employees in the digital asset ecosystem, indicative of the sector’s growth and dynamism.

The 47 entities surveyed reported a total of 1,283 full-time equivalents (FTE) working fully in a digital asset related area. Including all other staff, a total of 3,930 people worked with the entities polled, as of late 2021.

An another strong indicator of the growth of the sector is the expanding digital asset offering by Swiss entities, ranging from token issuance and staking, to lending and non-fungible token (NFT) services.

Bitcoin Suisse, a provider of crypto-financial services, launched a native decentralized finance (DeFi) offering in April 2022, allowing select clients to access blockchain-based credit.

Last year, Swissquote, Switzerland’s largest online bank, shared with Finews.com ambitions to become “the leading Swiss provider of digital assets,” announcing plans to launch its own crypto exchange in 2022. The company also said it was looking to add more cryptocurrencies to its trading offering, in addition to stablecoins and staking services.

And Mt Pelerin, a regulated fintech company providing crypto brokerage services to retail and business clients, wallet services and asset tokenization services, teamed up with DeFi project Jarvis Network in July 2021 to introduce three new stablecoins tracking the price of the euro, British pound, and Swiss franc, and boost trading.

Booming digital asset trading activity

The rise of the Swiss digital asset market comes on the back of surging digital asset trading activities. In 2021, total crypto trading volume ballooned to CHF 103 billion, a drastic rise compared to previous years, a research by the Institute of Financial Services Zug IFZ and Swisscom shows.

Direct investments through crypto exchange platforms, like Binance and Bitstamp, led in terms of volume, with total investments through the 15 largest centralized exchanges amounting to an estimated CHF 92.6 billion between October 2020 and September 2021.

During the same period, indirect investment products, including exchange-traded products (ETPs) and structured products like tracker certificates and mini-futures, totaled roughly CHF 7 billion on the SIX Swiss Exchange.

Finally, investments through the 15 largest decentralized crypto exchanges, including Uniswap and Sushiswap, totaled nearly CHF 4 billion.

A recent report by PwC, in partnership with Finery Markets and Alternative Investment Management Association (AIMA), named Switzerland “the leading country in digital asset trading,” pointing out the stable and secure political environment, the country’s experience and reputation of a leading global financial center, and the robust legal framework, as the main enablers of Switzerland’s burgeoning digital asset ecosystem.

So far, the Swiss Financial Market Supervisory Authority (FINMA) has granted regulatory approval to at least four companies focusing on digital assets and cryptocurrencies: SEBA Bank and Sygnum Bank each hold a banking license; and Crypto Finance and Taurus both received their securities firm licenses in 2021.

In addition, FINMA has granted so-called Fintech Licenses to four entities since introducing the license category back in 2019: Klarpay, a banking offering targeted at digital entrepreneurs;  Mogli, a digital payment platform for small and medium-sized enterprises (SMEs); SR Saphirstein, a startup building a payment network between Europe and Asia; and Yapeal, a digital banking offering.

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