Crypto Currency: How Does Switzerland Compare?

Rino Borini is a founding partner of financialmedia AG in Zurich, which publishes the PUNKT economics magazine and operates the leading 10x10.ch exchange traded funds information service. Borini is co-initiator of Finance 2.0, which is Switzerland’s largest fintech and crypto event platform. He also heads the CAS Digital Finance degree program at the HWZ Zurich.

moneyland.ch: Rino Borini, you have chosen “cryptofinance” as the topic of the next Finance 2.0 conference. What does that term actually mean?

Rino Borini: Cryptofinance is a relatively new word, which many people don’t fully understand. To put it simply, the term describes both digital currencies like bitcoin, for example, and the blockchain technology which powers them. Those are two separate things.

In the big picture, cryptofinance is basically about revolutionizing the financial system and making it securer, fairer, faster and lastly, cheaper. Cryptofinance usually denotes the bitcoin ecosystem, because that is where it started.

The Bitcoin discussion has gotten notably quieter. Was it all just hype?

I don’t find that the discussion has quieted down. Granted, the topic did not strike a chord with consumers at large, and presumably the same holds true for many financial professionals. Possibly the lack of scandal involved has made the topic uninteresting for the media at large.

But a number of interesting events have unfolded in the very recent past. Money transfer service Western Union developed a product primarily aimed at helping it gain a foothold in the Bitcoin market. Bank Vontobel launched a certificate which lets private investors speculate on bitcoin rates – with an unpleasant aftertaste, unfortunately. But generally speaking, I wouldn’t underestimate the digital currency topic.

What do you mean by “an unpleasant aftertaste”?

Almost all banks consider blockchain technology to be strategically important, while at the same time avoiding its basis in cryptocurrency.

Companies active in the field of bitcoin currently find it nearly impossible to open a bank account in Switzerland. The reason for this is that cryptocurrency-related fraud has been a recurring cause of alarm. If we are honest though: fraud attempts also occur with so-called “official” bank accounts.

How will cryptocurrencies change in the future?

What is clear is that technology will bring many changes. Whether cryptocurrencies have the potential to redefine the current monetary system is difficult to say.

Noticeable changes are already underway in the city of Zug, where since a few weeks ago, bitcoin has become accepted as payment for services provided by the Resident’s Registration Office. That is already a major development!

Bitcoin & Co. should not be brushed off as a game or freak currency, nor even as a fraudster currency, but as a development which is worth following closely.

Time will tell what our monetary system will look like in one or two decades. You don’t need to be an economist to realize that our financial system is no longer healthy: extremely high national debts, central banks which more closely resemble printing presses, negative interest rates, currency wars, loss of trust. And that isn’t even a complete list.

Blockchain has been the most discussed topic in the fintech sector for some time. Why is that?

Because blockchain technology has the potential to bring long-term change. While blockchain technology is complex, it helps to make things easier. And not only in the financial sector: blockchain technology can be implemented in any field where goods, licenses and other assets change owners. Or in the traceable certification of digital contracts. Within the next few years, we will see the term “digital identity” become more common on the Internet, and the blockchain system could provide the solution behind that development.

Does blockchain offer any concrete benefits?

The entire economic system would profit from safe, fast and cheap transaction processing. When the cost of transactions is cut, the economic output of a country is increased. Major Spanish bank Santander recently presented a study which estimates that using blockchain technology could save banks 20 billion francs per year. That would solve a number of banks problems, wouldn’t it?

What developments do you expect to see in the coming years?

A great deal of research is being carried out. A number of use-cases exist, including loyalty programs or the art sector, for example. UBS’ London innovation lab has discovered an interesting solution for the bond market. These developments are still in their early stages. In a few years we will be using blockchain technology without even noticing it. Most people today don’t have a clue about which technology powers their email service.

Which cryptocurrency startups are currently the hottest?

Several are currently putting together appropriate business models. The next few years will show which of these will be successful. At the moment, a “gold rush” mentality prevails. As with all such phases, the actual fact will eventually separate itself from the hype. Some of the first really promising solutions with potential for success are those which have been put forward by Bitcoin Suisse, Monetas and Xapo.

How does Switzerland compare in the cryptofinance and blockchain fields?

We may be a step ahead. Zug has become home to the “crypto valley”, which benefits the surrounding cantons and Switzerland at large. But in many cases, we stand in our own way. These initiatives need concrete backing.

What would define as “concrete backing”?

We need a more proactive political outlook which doesn’t overregulate innovation. Officials in Bern give their stamp of approval to a 400-million-franc subsidy for farmers, rather than backing Switzerland as a financial hub. But then, financial topics don’t win votes.

Rules are important, but we need rules that are suited to the 21st century and to a sector that is made up of young and innovative companies. Bank regulations implemented in 1935 are somewhat quaint in that regard.

But it’s also important that the cryptocurrency scene makes a coordinated effort to up the pressure. A great deal about these technologies is new and needs to be clarified, and those in the sector should play a supporting role here. Some are already active in this area, but all players should be pulling in the same direction. Not in two years, but now! Digitalization demands exponential thinking and equally fast actions.

Interview by moneyland.ch, July 25, 2016

The next Finance 2.0 conference on cryptofinance will take place on September 13, 2016 in Zurich. Get more information about this event here.