The Swiss financial centre in general and the Swiss asset management industry in particular are well known for high standards in terms of quality, performance and sustainability. Switzerland’s rich heritage with regard to financial security, strong privacy laws and pragmatic financial regulation play a central role, and might become an important catalyst for it to become a leading digital financial centre.
In the canton of Zug, ‘Crypto -Valley’ has established itself as the worldwide centre for business ventures based on blockchain and distributed ledger technology (DLT). Early movers such as the Ethereum Foundation and Bitcoin Suisse have been crucial to the development of an ecosystem of nearly 1,000 blockchain-related companies and thousands of highly specialised employees. Many of these companies offer blockchain-based financial services that have the potential to fundamentally change core elements of today’s financial systems. While the diversity of companies and business ventures is almost limitless, a majority of them come from the areas of investment management and banking infrastructure.
One of the key factors driving the success of the hub can be found in the country’s bottom-up, decentralised and neutrality-oriented political culture. It is a perfect fit for a blockchain world that promotes decentralisation and democratisation. The Swiss authorities’ pragmatic and business-friendly attitude as well as easy access to capital were instrumental in the hub’s development. The Swiss Financial Market Supervisory Authority, Finma, was the first regulator to publish comprehensive guidelines on ICOs and classifications of tokens in 2018, which attracted talent and capital. Swiss-based SEBA and Sygnum became the world’s first crypto banks when Finma awarded them banking licences in 2019. Furthermore, in 2020, the Swiss authorities passed a legislative package affecting all the relevant financial laws that will bring favourable changes for blockchain- and DLT-based financial services.
One area of particular interest is decentralised finance (DeFi). In the ideal DeFi world, everybody would be able to participate in transactions without being dependent on banks, stock exchanges or other institutions. Things are developing rapidly. Smart contract-enforced investment infrastructure providers such as Enzyme Finance are about to prove the concept of managing pooled assets on-chain without having to rely on third parties and intermediaries such as fund administrators, custodian banks, settlement agents and so on. While this currently takes place in a lightly regulated environment limited to tokenised assets and on a comparatively small scale, it shows that innovative blockchain-based solutions could radically change the way the asset management industry works.
While Switzerland is well placed to take the lead in the change that will affect the financial system, it shares this ambition with other European countries. This is by no means a bad thing. Only by collaborating with and leveraging the strengths of European financial centres will we stay at the forefront of this exciting journey. The Asset Management Association Switzerland, its partner associations and many of its member firms do not see the latest developments as a threat, but as a great opportunity.
Lorenz Arnet is senior business counsel at Asset Management Association Switzerland
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