Reality Check for Swiss «Crypto Valley»

A study shows that Switzerland and its «Crypto Valley» might need to take a reality check when they talk about having the best conditions for financial services with digital assets.

The «Swiss Digital Asset and Wealth Report» published Thursday speaks of «the incredible depth and breadth of the Swiss digital asset industry that has sprung out of Crypto Valley.»

«Crypto Valley» now has 960 companies employing 5,200 people.

Around 50 Companies in Digital Asset Ecosystem

Of these only a fraction is specifically involved in digital assets and crypto finance.

The author of the report, ex-banker and crypto investor Alexander Brunner, put it together in collaboration with blockchain venture capital company CV VC. He counts around 50 companies the as being part of the Swiss digital asset ecosystem. These include technology services companies, custodians, brokers, asset and wealth managers.

Many of these providers such as broker Bitcoin Suisse or the first licensed cryptobanks in the world, Seba und Sygnum, are among the fully integrated service providers. Then there are infrastructure specialists such as Dsent, Metaco, Custodigit or Taurus, who provide custody services for tokens and coins.

Most Banks Hesitant

Some traditional banks such as Incore or Hypothekarbank Lenzburg offer infrastructure and banking services. However far more of them have hesitantly started offering services to customers. These include Julius Bär, Bordier, Neue Privatbank and BBVA (Switzerland). The Zurich private bank Maerki Baumann also offers advisory services on digital assets.

Speaking to journalists, Brunner pointed out the underdeveloped areas of the ecosystem: the absence of regulated trading platforms and the lack of advisory services which made client acquisition difficult. The lack of a regulated Swiss would prevent banks in particular from going into the crypto business, he added.

Lack of Volume

The report also shows lack of volume is another major weaknesss in the Swiss digital assets market. It puts assets under management at $1.2 billion of which $1 billion are managed by exchange traded funds provider 21Shares.

The report also says that Switzerland is a small domicile for funds compare with Luxembourg, the U.K., the U.S. or Singapore. «The lack of scale is clearly a stumbling block.»

«Great Leaps Needed»

Brunner pointed to the absence of Credit Suisse and UBS, who have a wait-and-see or even hostile attitude to digital assets. Their attitude would probably change with clearer international regulation and the expected launch by Swiss exchange operator SIX of the SDX crypto trading platform as well as from customer pressure

«Great leaps are needed», Brunner said, while things were still just starting up.

The sobering figures on the Swiss market mean it is obvious that providers will have to look beyond Switzerland. If they don’t there will be massive consolidation.