Blockchain and distributed ledge technology (DLT) watchers will undoubtedly have been closely following recent developments in Switzerland, where the government just unveiled a comprehensive legal framework for regulating blockchain on a national level.
This framework is decidedly progressive, taking a much more open approach to blockchain applications than many other countries. It’s very likely that this radical legislation could see Switzerland turn into a global haven for blockchain and cryptocurrency, aided by its existing status as a financial haven.
The potential benefits of this legal framework being realized are myriad, so let’s dive into the current state of play in Switzerland to see if this tiny country really could become the global epicenter of blockchain applications.
The current state of play
Perhaps unsurprisingly, the biggest stakeholder in blockchain developments at the moment is Switzerland’s gargantuan financial sector, which is one of the largest and most diverse in the world. The parent company of Switzerland’s Stock Exchange, SIX Group, is currently building a fully-integrated trading infrastructure for digital assets using blockchain technology and relying on digital ledgers.
Given the reputation Swiss banks have for catering to the needs of their clients, it also shouldn’t come as a shock that they were the first in the world to offer business accounts for cryptocurrency companies. Major banks such as Swissquote are also offering crypto trading options for clients with the full blessing of Swiss regulators.
This makes the country one of the most eager adopters of blockchain technology, with such an open-arms approach being completely unheard of in most other countries. While regulatory bodies in other countries have begun to shy away from cryptocurrencies, perhaps partly due to several cryptocurrencies’ drop in price in 2018, Switzerland sees them as a significant component of the future of finance. With bitcoin continuing to gain in prominence as a payment option for traders and investors, the leaders of the country’s financial sector are keen to be seen as embracing change. The red carpet is essentially being rolled out for blockchain and cryptocurrency related companies, which are flocking to set up shop in the Alps as a result.
It also helps that Switzerland’s financial infrastructure is better placed than most to implement a blockchain revolution. The central banking systems have historically been eager to adopt the latest fintech developments, and the reason that the latest regulatory framework takes such a light-touch approach to blockchain is partly that such technology would not cause much disruption in the first place. In fact, Switzerland also has a prominent fintech startup scene, with four of its companies – Temenos, Avaloq, SIX and Crealogix – ranking among the top 100 in the world for 2018.
Beyond the banking system and the stock exchange, blockchain applications have proved useful in a number of other ways as well. Major insurance providers such as Swiss RE and Zurich Insurance have long been inputting data into blockchain networks in order to counter fraud and improve operational efficiency. Blockchain is also being used in the logistics and transport sector in order to better improve the delivery of food, medicines, and fuel. The country also has one of the best healthcare systems in Europe, partly aided by the fact that blockchain has been rolled out to produce smart contracts between various treatment providers, in order to improve the accuracy of medicine delivery and stay on top of patient records.
None of this has happened overnight, of course. Switzerland has long dominated the global rankings in technological readiness, ranking near to the top in both the World Digital Competitiveness Index and the Networked Readiness Index. The cities of Zurich, Geneva, and Bern are also global hubs for fintech startups, while the Swiss government has eagerly supported innovative companies of all sizes at a regional and national level.
All of this means that if any country was going to embrace blockchain technology, there are few more likely candidates that Switzerland.
What this might mean for other countries
The set of circumstances that have led to the point are in many ways unique to Switzerland, but the implications for other countries are clear. If European countries such as the UK and Germany want to retain their status as leading financial hubs, they may find themselves under increasing pressure to embrace blockchain technology within the sector and create a more welcoming environment for cryptocurrency traders.
This new legal framework clearly gives Switzerland a competitive edge in finance and trade, so it would not be surprising to see other countries follow suit in the next couple of years. Switzerland’s strong positive international reputation may also persuade countries that have taken a hardline stance against crypto, such as China and India, to deregulate and remove existing controls that their respective central banks have put in place.
Most importantly, as the next few years see Switzerland adopt blockchain as a means of delivering better public services, governments across the world might see themselves facing increasing pressure to do the same, once the results are clear for all to see.
By Chloe Sebastian