While other countries are trying to curtail the rogue cryptocurrency sector that has emerged within the last couple of years, Switzerland – the banker’s favorite destination – seeks to become the “crypto-nation” that everyone in the money laundering business could take advantage of. Financial security remains in demand, and Zug aims to be the capital of this cryptonation.
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. All of this is stored in a decommissioned military bunker in the Swiss Alps. Zug is truly a cryptocurrency haven: “Bitcoin accepted here” stickers can be seen all over the city shops. In 2016 Zug became the first place in the world to accept bitcoin for some public services. Residents can even opt in to receive a digital identity based on blockchain.
Almost a quarter of $5 billion in initial coin offerings which was the global total in 2017 (ICOs, a form of crowdfunding whereby investors are issued with digital tokens) was raised – you guessed it – right in the banker’s heaven. Of the ten largest ICOs, four were in part based in Zug.
Attracting crypto-entrepreneurs might be a sound option for Zug, as they could allow companies to incorporate based on bitcoin wealth, rather than insisting that it be converted into fiat currency. With low taxes at 14.6% they are competitive compared with Zurich’s 21%.
The crypto-chapter of Zug’s history began in earnest in 2013 when the Ethereum Foundation, a non-profit to support the development of the eponymous blockchain, based itself there. More crypto-firms followed. Now, there’s around 150-odd of them, and the local tax authorities can safely be considered experts in the field, along with their accountants and lawyers.
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.”
Regulators elsewhere see it as their job to protect consumers from dubious new crypto-currencies. But Switzerland has a different take: “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, over-regulation is not the answer.