How Switzerland is shaping global cryptonomics

Andrew Gillick , 11 Jul 2018 - BitcoinBlockchainCryptocurrencyOpinion

An idyllic lakeside town nestled in Switzerland is becoming the unlikely global control centre for blockchain and cryptocurrency. Zug has been dubbed “Crypto Valley” for attracting startups, ICOs and brain power but the country as a whole is carving itself out as the dominant thought and policy leader in the industry. With its culture of financial secrecy and favour for the ultra-wealthy, should we be asking whether this is such a good thing?

Historically, Switzerland is synonymous with growing the wealth of the rich and hiding it away from the rest of the world to preserve it. Private banking, vaults of gold hidden deep within mountains and personal financial alchemy have become the country’s domain of expertize since the Japanese outdid them at watchmaking with their quartz technology.

Why are the Swiss so interested in crypto?

Since bitcoin was conceived as a way to send pseudo-anonymous transactions it is only natural that the Swiss would be interested in a technology that makes their job of hiding people’s money easier.

Switzerland is the world leader in private banking and home to the world’s largest private wealth manager, UBS, with $2.3 trillion of assets under management for high net-worth individuals — Credit Suisse is the third largest wealth manager behind JPMorgan. Comparatively, this is over three times the annual GDP of the entire country. Both Swiss bank CEOs and policymakers are alert to the potential disruption crypto assets pose to this business if people really were to use them as a store of value as opposed to gold.  These fears are shaping the corporate form of the industry as the Swiss create novel ways of integrating the new technology with its legacy financial sector.

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The price of bitcoin against the US dollar BTC/USD in red over gold and US dollar XAU/USD.

One of the major benefits of crypto assets over the traditional physical storage of value, like gold, is precisely that it is digital and doesn’t need to be physically stored. However, an almost parodic industry has been created in Swiss wealth management - computer servers housing cryptocurrency private keys stored in Swiss gold vaults, hidden within alpine mountains.

This month, the company that operates the Swiss stock exchange, SIX, announced its plans to launch a crypto trading platform that will be “the first market infrastructure in the world” to be fully regulated where digital assets can be issued and existing securities can be tokenized. The Swiss seem determined to put an “official stamp” on crypto first.

Home of the World Economic Forum 

With a population of just 8 million, Switzerland has a disproportionate representation in the financial world, with the world’s largest banks and the most influential financial think tank, the World Economic Forum (WEF), situated there.

The not-for-profit WEF was created in 1971 by German economist Klaus Schwab who was also a business professor at the University of Geneva at the time. Its annual conference in the alpine town of Davos has become the Coachella of the financial world where politicians, bankers, CEOs, rock stars and celebrities of all kinds network apparently for the benefit of mankind.

The invite-only event costs in the region of $72,000 for membership and a ticket — and as much as Davos has become the mecca for globalization and neo-liberal economics, it has also become a focus point for protestors who make an annual pilgrimage there to object to its corporate doctrine.  

The Swiss school of cryptonomics

In 2016, Schwab the 80-year-old progenitor of the WEF published a book titled The Fourth Industrial Revolution, outlining his thesis of the future economy and the chronology of the previous three — contrary to years of acceptance that there has been just two preceding revolutions.

To propagate Schwab’s Fourth Industrial Revolution thesis, the WEF has established the Centre for the Fourth Industrial Revolution in the US. This month it also opened a centre in Japan and later this year will open centres in India and China.   

The centre says it engages with “governments, leading companies, civil society, and experts from around the world to co-design and pilot innovative new approaches to policy and governance in the Fourth Industrial Revolution.”

The centre is “co-designing and piloting policy frameworks and governance protocols across nine areas of focus” - among them AI, machine learning, IoT, drones and blockchain technology.

The forum’s board of trustees is a diverse bunch of politicians, business people and royalty, among them former US vice president Al Gore and Alibaba founder Jack Ma.

That global centres of research and policy-making for the future of these emerging technologies are taking place under the banner of one man’s book is almost unheard of — apart from Scientology’s L Ron Hubbard. Would we be receptive of Al Gore’s Centre for Inconvenient Truths that influenced global climate policy?

Conclusion

Many countries are positioning themselves for the impending technology revolution — regardless which iteration — and many of them are smaller nations like Malta, Cayman Islands, Gibraltar and Lichtenstein that want to protect the financial centers that make up a significant part of their economies.

Switzerland is no different in this regard but its expertise in growing and hiding the money of the world’s ultra wealthy and helping them circumventing jurisdiction tax laws is a culture antithetical to the “unbanking the banks” ethic that cryptocurrencies have sprung from.

 The WEF, while by no means an official representative of Switzerland, is the pinnacle of neoliberal economic thinking of a class of millionaires and billionaires that pushes for globalization uber alles (even though Trump’s protectionist policy has proven its powerful efficacy). The massive push of its Fourth Industrial Revolution doctrine espoused by one man is worrying and has the potential to take the financial power of cryptocurrencies away from the people they were created to empower.