Much has been said about Central Bank Digital Currencies (CBDCs) and governments’ affinity for them. While China and Japan appear to be at the forefront of this digital currency innovation, Switzerland appears to be making significant progress.
Transforming the Payment System
Yesterday, the Swiss Center of the Bank of International Settlements’ Innovation Hub (BISH), announced that it had completed two proofs-of-concept for a possible wholesale CBDC. Dubbed “Project Helvetia,” the new CBDC initiative is a collaboration between the BISH, the Swiss National Bank (SNB), and Six Group, the country’s top stock exchange.
A separate announcement from the Six Group highlighted that Project Helvetia would explore the legal and technological feasibility of transferring digital assets via a wholesale CBDC.
From there, the assets will move to the Six Digital Exchange, the stock exchange’s proprietary distributed digital asset platform. The platform will also include services like toke issuance, trading, custody, management, and settlement.
Although the development shows that Switzerland’s top financial minds believe blockchain has a role in the country’s financial future, it doesn’t necessarily indicate that they will use it in launching a wholesale CBDC. The partners also highlighted that the experiment doesn’t solidify their interest in establishing a CBDC.
Andréa Maechler, a governing board member at the SNB, highlighted that the project indicates the agency’s acknowledgment of innovative technologies. Thus, they simply don’t want to miss the chance to incorporate these technologies into the financial system.
“Irrespective of which technologies the financial markets adopt next, the safety and reliability of Swiss financial infrastructure must be preserved. If [distributed ledger technology] can deliver significant improvements in securities trading and settlement, then the SNB will be prepared,” he emphasized.
Still Dallying on the CBDC Issue
The BIS itself has been quite reluctant to dismiss the importance of cash in favor of CBDCs. Last month, Benoît Cœuré, the head of the Innovation Hub, argued that fiat money would remain its position despite the growing CBDC frenzy.
Cœuré highlighted in his interview that while cash isn’t being used so much as a payment means, it is still a considerable currency form. Instead of pushing or CBDCs to be the status quo for payments, he counseled that governments should focus on providing a variety for their citizens.
While countries in the Euro area remain split in their opinions, China and Japan are moving ahead quickly. China already began conducting tests for its digital yuan, consolidating several partners and regions to be a part of the tests to see how the asset will operate.
As for Japan, it will begin a proof-of-concept for its digital yen next year. In October, the Bank of Japan sent a document to the BIS, highlighting that it would build an asset that can work for wholesale and retail customers. The agency added that its preferred digital asset would be able to work amid infrastructural breakdowns – especially in the face of natural disasters.
Swiss banking license holder, Sygnum Bank announced on Thursday the launch of a blockchain-based platform for listing tokenized securities.
The blockchain-alternative of the stock exchange will support both primary and secondary listing: Desygnate is for the primary market, while SygnEx is for the secondary market trading.
“Empowering both issuers and investors to create and have access to unique, often frontier, investment opportunities has been a core part of Sygnum’s mission since day one,” Sygnum’s Group CEO, Mathias Imbach said.
“With Desygnate and SygnEx, we bring a blockchain-powered business solution to market which opens up a world of new opportunities for capital market participants to do business.”
According to the crypto bank, the new platform will offer companies to raise capital faster, built liquidity, and efficiently transfer ownership and manage corporate actions.
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The blockchain-based platform will also allow investors to access markets like venture capital, mid-cap, real estate, and art & collectables. According to Sygnum, the settlements will be done round the clock in its Swiss Franc stablecoin, the Digital CHF (DCHF).
The company is primarily targeting to connect Switzerland’s estimated 600,000 SMEs and 45,000 new companies founded each year with the investors, allowing them to raise capital via tokenization.
Making of a Crypto Banking Giant
Sygnum became one of the first two Swiss crypto companies to receive a banking license from the Swiss Financial Market Supervisory Authority (FINMA). This license allows the company to issue, store, trade and manage the digital assets Bitcoin and Ethereum and offer other digital currency-related services.
Along with its presence in Switzerland, the company has further expanded its global base and gained a capital markets license in Singapore.
Earlier this month, the Swiss company launched staking services with Tezos, which will allow the token holders to earn up to 5 percent in staking rewards.
This is the final part of a three-part series of articles about the state of blockchain in Europe. The series covers the blockchain scene in some of the most important European nations. I would like to thank PR firm Wachsman for sharing with me the facts & figures and the commentaries present in this series. Part one may be read here and part two, here.
The Netherlands and Switzerland are the remaining two European countries whose blockchain spaces will be reviewed in this third & final part.
It will not be incorrect to say that the Netherlands is on the rise on the global blockchain scene. This European nation recently hosted the Odyssey Hackathon, the biggest blockchain and AI hackathon in the world. The event was supported by the Netherlands Authority for the Financial Markets (AFM), the Ministry of the Interior and Kingdom Relations of the Netherlands, the European Union Regional Development Fund, De Nederlandsche Bank (the Dutch Central Bank), KLM and Deloitte. With 1,500 people in attendance, it saw 100 teams compete for €200,000. The Special Envoy of Startup Delta, Prince Constantijn van Oranje-Nassau, also supported the hackathon.
The Netherlands is home to 135 blockchain startups.
Night view of the Swiss canton of Zug and its lake. Crypto Valley Association, an autonomous, government-backed alliance founded to leverage Switzerland’s strengths to create the world’s foremost blockchain and cryptographic ecosystem, is based in Zug.
The presence of state-of-the-art centers and knowledge hubs like Crypto Valley, which hosts 20% of the worldwide blockchain market; flexible regulatory bodies and the government’s strong encouragement have all enabled Switzerland to thrive as a leading hub for blockchain revolution. Switzerland is also the ICO capital of Europe, where firms raised $456 million in 2018, and $1.46 billion in 2017. Startups in this European nation received nearly 1.24 billion francs (almost $1.25 billion) of venture capital in 2018, about 32% more than the year before.
As for the number of DLT startups operating in Switzerland, there are 712 of them (out of 750 companies in the Crypto Valley) as of Q1 2019. Demonstrating the breadth of firms in the Swiss blockchain cluster is the startup Utopia Music, which is a new entrant into the Crypto Valley top 50 and the only media and entertainment firm to do so.
Switzerland also hosts four Unicorn startups (firms already worth billions). These startups include Dfinity, Cardano, Bitmain and Ethereum.
Crypto Valley Association president Daniel Haudenschild said, “At the heart of the blockchain movement, the Crypto Valley Association has been central to creating Switzerland’s leading position as a pioneer in cryptocurrency and blockchain. The valley is home to some of the most innovative and influential blockchain companies in the world, only made possible by the friendly regulatory environment, secure and predictable legal framework, world-class infrastructure, talent pool, sound policies and economic strength here in Switzerland.”
Armin Schmid, CEO of Swiss Crypto Tokens, part of the Bitcoin Suisse Group, stated, “At Swiss Crypto Tokens, we consider ourselves very fortunate to call Switzerland home. The Government here has always shown great encouragement of the blockchain community and this has undoubtedly been a huge part of our success in positioning Switzerland as the ‘Crypto Nation’. In addition, given how developed and influential the Swiss financial sector is — managing around 27.5% of all global cross-border assets — Switzerland is an ideal environment with a stable economy and currency for liquidity-providing instruments such as the CryptoFranc, our Swiss-Franc pegged stablecoin.”
End of Series
Image credit – Mensi (CC BY-SA 3.0)