Of the 250 banks that earlier allowed companies to transact in cryptocurrencies, only two are active. While much of the business has gone to Liechtenstein, Swiss authorities are bent on taking back the crown.
Regulators in Switzerland are stepping up their efforts to halt the exodus of cryptocurrency projects from the country. Currently only two of only a handful of banks are active in the nascent cryptocurrency sector after many shut their doors on it in 2017.
The shuttering of cryptocurrency services means Switzerland is losing business to others including Cayman Islands, Liechtenstein and Gibraltar.
Incidentally, the cryptocurrency business in the country is minuscule compared to the traditional banking sector, which has grown rapidly and employs hundreds of people, according to local officials.
Supporters of cryptocurrency consider it as a innovation for the future of global finance.
According to Heinz Taennler, the finance director of Zug, a “Crypto Valley” in Switzerland, virtual currency entities may leave for greener shores if the government does not take steps to give them access to the banking system without which they struggle to survive.
“All their banking relationships are going to Liechtenstein,” said Taennler. “These are hundreds of jobs that have been created, and every job is important.”
As per Thomas Moser, a member of the governing board at the Swiss National Bank (SNB), some cryptocurrency companies had asked the central to intervene.
“They raised concerns about problems with opening bank accounts, which was a worry for them, and asked for help,” said Moser. “I said this was not something the SNB dealt with, but they should speak with FINMA.
He went on to add, “We would not want to close the door on the opportunities that such innovation (cryptocurrencies) might bring”.
Already, FINMA, Switzerland’s financial market regulator, has held discussions with the SNB and bankers’ association on ways to make the country’s banking system more accessible to cryptocurrency ventures.
Providing a legal framework for the launch of ICOs and for banks to conduct business with cryptocurrency companies has headwinds. Regulators around the world see the lack of transparency regarding who actually owns the cryptocurrencies such as bitcoin and ether, as well as the risk of fraud, as areas which need to be addressed for any legal framework can be made.
While the U.S. is among countries that are increasing scrutiny in the sector.
Swiss banks are pushing regulators to provide them more clarity as to what rules apply to cryptocurrency projects before they get involved in this market. Already two significant players have withdrawn, for now.
According to industry sources, Zuercher Kantonalbank (ZKB), the fourth biggest bank in Switzerland, has closed the accounts of more than twenty companies in 2017. It was one of the few banks in the world that had welcomed issuers of cryptocurrencies.
Although ZKB’s spokesman declined to comment on any of its existing or former clients relationships, he however mentioned that the bank does not do business with any cryptocurrency groups.
Only a handful of Switzerland’s 250 banks ever allowed companies to deposit the cash equivalent of cryptocurrencies raised in ICOs. Of the 250, only two still continues this practice.
As per industry sources, Swiss banks are worried that the companies that carried out ICOs did not potentially comply to anti-money laundering (AML) checks on their contributors, which means they could potentially be responsible for not adhering to AML rules.
The two banks which continue to cater to cryptocurrency customers are Banca Zarattini and Hypothekarbank Lenzburg, a regional lender located between Zurich and Basel, which recently began accepting.
According to Banca Zarattini, it only takes on business with banks and ICO companies who have complied with KYC (know-your-customer) and AML procedures that are in compliant with Swiss law.
Hypothekarbank Lenzburg stated it had started to accept crytocurrency companies and could charge an initial assessment fee of up to $2,500 (2,500 Swiss francs).
So as to address the issues and concerns of Swiss banks, FINMA has issued separate guidelines to spell out how Swiss AML rules and securities regulations apply to various ICOs.
However, since securities regulations are less stringent in Switzerland than they are in the United States, where the Securities and Exchange Commission (SEC) has toughened its stance on ICOs, the involvement of Swiss banks with ICO projects which may have raised money from U.S. contributors could potentially create issues since it could come within the purview of the SEC.
Authorities in Switzerland have said, they want to create conditions so that the country remain competitive in this cryptocurrency space, however they have said they dont want to provide any room for scams or financial crimes.
The country’s finance ministry is also looking at the broader legal framework for blockchain technology and ICOs.
($1 = 0.9913 Swiss francs)