Regulatory uncertainty surrounding ICOs pushed many blockchain companies to set up base in the “crypto-friendly” Switzerland. But then major Swiss banks started denying their services, and the climate appears to be souring with crypto companies looking for friendlier pastures. As new regulation passes in Malta and solarisBank in Germany opens accounts for blockchain companies, Switzerland is scrambling to keep its crypto-friendly title.
What Happened to Crypto-Friendly?
ICO funding eclipsed VC funding for early-stage investment in 2017 and Switzerland became the largest hub for ICOs. Although small compared to the Swiss banking industry (the fifth largest in the world) ICO funds are still significant. The Swiss canton Zug (AKA Crypto Valley) quickly became home to over 200 blockchain companies.
Clampdowns in the USA? No problem. Uncertainty in Japan or China? The Swiss were rubbing their hands with glee. Until UBS closed accounts for crypto companies and, one by one, all major Swiss banks followed suit.
One of the banks that helped establish Switzerland as a crypto hub, may also be playing a part in killing off momentum. Currently, there’s just a handful of banks left from the country’s 250 that will work with crypto companies in Switzerland. And with solarisBank in Germany opening their doors to blockchain startups, the Swiss will need to act fast to halt the exodus.
Why the Swiss Banks Are Reluctant to Work with Crypto
According to Reuters, Swiss banks are concerned about lack of regulatory clarity and demand clear rules from regulators before offering their services to the crypto market. One of the most notable concerns is that many ICOs do not carry out adequate (or any) AML checks on investors. This is a problem for the banks since they are legally obliged to do this.
Swiss Financial Markets
Failing to comply with due diligence when it comes to AML for a bank is a huge liability. The Swiss banks that decide to work with blockchain companies will require strict KYC/AML compliance.
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