Make the Crypto Valley Great Again: 12 Steps to Do Just That

Transcript

Let's talk about that in a second. But first, uh, dear guest, can you quickly tell us your name and, uh, where you are working at? Um, Hans Kun. I'm a bloody lawyer. Um, but trying to be um, helpful. Um, I'm I'm practicing in banking, financial sector, and increasingly blockchain law. and I'm quite quite active in the Swiss blockchain federation. Thank you. Hi, my name is Ava Salamlar. I'm heading the Swiss Financial Innovation Desk since roughly one and a half years and uh the Swiss Financial Innovation Desk is the living action uh area of action number 12 of the digital finance report of the

Federal Council with the mandate to make better use of Switzerland's innovation potential. And so we are a pilot so don't get too used to us. Uh but during those three years of the pilot we really want to make sure that we have the optimal framework conditions and that wherever we find #find hurdles that they are conserved away moved away. Hi everyone. I'm Nicholas from CIF um deputy head capital markets and infrastructures. What we are basically doing at CIF is working on the regulatory framework. Uh that concern also blockchain DT um I'm working on some other things in the digital space like AI, open finance etc.

trying um to push innovation in responsible innovation in Switzerland let's say. So thank you. Hi I'm Lis Meister. I'm board member of Bitcoin Swiss. I'm also a board member at the Frankencoin Association and Actat and I'm an expert at the Swiss blockchain federation and that's how I was involved with the 12point manifesto. Thank you guys. Um before we talk about the 12point manifesto if you mentioned that you have done a study a survey on well Switzerland and its businesses. Can you give us a little more detail into what you have done and what you have

found? Yes. So um maybe just let's take a step back. Um Switzerland has been the world champion in innovation for 14 executive years according to the world um intellectual property organization. Um and nevertheless there have been statements since you know since I started my job that we're losing we're losing out um we're not as competitive anymore then there have also been seen in certain rankings like Geneva and and and Zurich they have lost uh some ranks in the global financial innovation uh um financial center index.

Then the fintech study um of this very uh institution the EVET Hiselu has identified a stagnation in the fintech sector right 0% growth while our colleagues in Likenstein um can rejoice about a 27% growth and so this was then basically the trigger to really dig deeper and to find out what is happening and we launched this uh this market survey um not just with regard digital assets but but much broader uh and uh and try to find out what's going on. And so our target group was projects that have evaluated Switzerland as a

potential jurisdiction but then decided against Switzerland but then also projects that are here but that are at risk of leaving. So we call it exit interview and uh we got back uh 57 answers and some answers also said you know um this answer is an answer on behalf of like eight projects that I advise because it's difficult to find those projects. So what we did is we we reached out to the associations, we reached out to the law firms that have specialized um in financial markets, in financial innovation, fintech and and so tried to locate those um candidates, exit candidates uh like that. And so the

answers were were very interesting uh in terms of um you know the rooms for improvement. I I would say um it's still a great ecosystem. We have a very dense ecosystem. We have specialized lawyers, consultants, we have um toprated universities, you know, R&D going on in those areas. But some things actually need a bit renovation. If you if you take that analogy to imagine the Swiss financial sector as a uh con hotel, like a five-star ranked hotel. So, you know, maybe it's time for a little renovation here and there. And one of the main areas was speed uh in terms of getting licenses

but also in terms of getting maybe a no action letter. So uh just the the the the the the actual licensing process. Then another one was um lack of clarity in the regulation itself maybe also certain Swiss finishes. The third point was um market size, market access, investor access. I mean we are here in the middle of Europe but there are some iron iron curtains being drawn up as I would like to site my colleague Hans here. And then um fourth was um a a mix between you know talent uh hiring talent but then also tax. Uh so we are now um about to finalize and and uh like

finalize the evaluation also doing some call back interviews because half of the answers I said uh we are we're there we are available for further questions and then we will make those um um results we will make them aware to the respective colleagues um within the government but then also at at the given time back to the public. Thank you. Um, independent of of your research um, Hans we uh, we were together, Blockchain Federation, the Bitcoin Association, Switzerland, the Cryptoellia Association and a few more were working on on this 12point agenda. U, could you give us a

little bit detail how this started and where this is going to? Yeah, sure. Um and and indeed this is a kind of of very very um lucky coincidence. Um it it started independently but I think we have a very broad overlap with what you have and the starting point the trigger point really was a growing uneasiness about missing out this excellent starting point um we had in in in Switzerland uh due to um proactive early regulatory clarity and a favorable political environment um that that would that's what what triggered the the the the creation of the the crypto valley and this this

ecosystem you referred to. Um so really a growing uneasiness a growing sense of urgency that we need to do something um including by people way outside of the ecosystem. I mean, I'm talking to an 80-year-old banker that uh is struggling with email, but that clearly understands if we're missing out um innovation, if you're missing this this this uh um this this change in the way financial services are being produced and distributed. And we're talking about this one. We're not only talking about crypto, then um this will have a um um a deep and and bad impact on on on on this country as a as a whole. we then try to

to put this into words words to try to analyze um what what is actually happens and I think there are two it's it's twopronged um on the one hand it's um a growing change in our environment in including the US as an example with other jurisdictions quickly um catching catching up and that's per se a good thing um we certainly can't do um anything about that but then there's other um staff homegrown problems that we need to address. And we then tried to identify the most important pain points.

Um, and these are these 12 points. And I think what's important to to recognize here, there's not there's not one single silver bullet. Um, this is quite a diverse um collection um of of uh of of of issues on on completely different levels. starting on on on the lack of strate strategic commitment to to innovation which in our view is the most most important uh um point. We need we need to have again this commitment that we want um innovation um in this in this industry down to to minutia like for example the the um length of licensing

pro uh procedure which which are real and massive uh pain pain point. Um the the feedback we got is that we we we got it quite good. I mean there are always diverse views and diverse interests also but I think this this captures quite good um these these relevant pain points and the last point I'd like to make which is also important this isn't a one-off exercise um this is in our view uh the starting point for an ongoing um process because we are not only calling upon parliament what the authorities to do stuff we are

not This this is part of what we what what we are calling for of course but this is also um directed at the industry um at the associations uh to do their homework to to provide solutions um and um we will have next week um um a first meeting to identify action points for the next six months uh which on the one hand will will be focused on on legislation and legis legislative actions. That's that's that's that's an important point certainly. But then also trying to identify and trigger um work streams um and projects uh led by the associations and the industry to um make

the crypto valley great again. Yeah, thank you. Um the 12point manifesto was uh announced roughly five weeks ago and it was uh covered in multiple different newspapers and media and I think it got great attention on the market. So that was really impressive and if you have not read it look up 12point manifesto or go to blockchainfederation.ch will have the possibility to read the full document. Um it's kept high level and really worth your time. Um, Nicholas, you also read the document and there is a little bit of of uh a few points that we have some critique on the government,

but what is your opinion on that? Is is it all on the government side or or what what how did you receive this 12point manifesto and what were your thoughts? I so so I do really like where the this discussion is going. I think I think the two two previous speakers already highlighted um it has to be some kind of common efforts right uh to move forward. Um I think we all have our jobs to do. Um there is we we are all as well scouting out for how to move forwards, how to be better.

Um I think on the government side um and basically because I'm I'm an economist so I think what you think about is first of all you have to go the basic right um and I think they already spoke about this but uh you need to have good education you need to have uh um security for investments as well right in many countries that's not a given um and well maybe it's a bit boring in Switzerland but we have a lot of stability right things sometimes take long uh but it's as well I think a good sign um or it's something good as well in our uncertain time uh so so you you have to get all this basic right and I

think we are quite good at it uh probably some stuff to improve but we are already quite good um then I think the second stuff that struck me as well is we already developed the hub right and if you look at economic theory as well when you get the hub then it's much more easier to get talents as well because people can change you know from one firm to one firm. Um it's much easier as well um for companies to speak together uh to collaborate and what is really cool as well is that you have then as well experts uh like like some of them here uh association as well that are specialized and you can really start to talk together. Um and I think that's something really useful that is

established in Switzerland that should go on and that should be reinforced as well. Uh so improving this dialogue, improving as well in a way how we do things together, standardize, come up with compliance solutions etc. Um and maybe the last point because you talk about what can civ do what can the government do. Um well I think you know as a government you need to be reliable that's a thing you know political stability etc. um you need to have good regulation in place. Uh I think there there was the DT act that entered into force in 2021. Um there is surely some stuff to improve.

Uh and we are very happy to take inputs as well. Um right now we are working on uh regulatory changes. Um it concerns the fintech license. So we are trying to to make it better. uh but as well trying to leverage it to create a better framework to emit stable coin in Switzerland and working on crypto assess service providers as well. Um and that's something that we'll we'll open a consultation in October this year. So very happy to to have a discussion about this uh when the time is right and to take feedbacks as well.

Thank you. And it is already a great sign that you are here with us in Rokit on this stage being open uh for a dialogue and and uh so we we we really appreciate that and we do hope that there is uh a potential for for us working more closely together different regulatory bodies and uh really really look forward. Um, Lucius, what is what is your thoughts like how how how do we stand here in the crypto valley and um is it all that bad as we discussed? So, Switzerland is in a generally in a challenging position because we're a small country. So, if we do equally well

as everyone else, if you have the same law as everyone else, why should anyone come to us? So, because we have the smaller market, then the choice would always be the bigger market. So we need to be better than anyone that everyone else. We need to be more agile otherwise we don't win. So and traditionally we had a very interesting combination of stability and innovation and this looks like a contradiction because innovation grows requires creative destruction. It requires that the old trees sometime fall and the young trees can grow. And what we uh traditionally have been doing really well is having stability in the big question like legal certainty like

strong property rights like knowing that if you do something you can rely on the rules that they are still there in five years in 10 years. So you can reliably build something and at the same time you have the freedom to build. You have the freedom to try out new things. And this is a reflection of a principle-based legal system where there's a few strong principles to manage the big risks and a lot of freedom to take small risks. And we we have to restore this balance again because what we can observe in the market in the past few years we shifted towards micromanaging the small risks like with all with the travel rule all

the these micromanagement really small detailed rules that when you look at them actually don't make much sense the way they are implemented and this microman of the small risk came with the manifestation of a bigger risk. risk the fall of credit risk and I think what we need to try we need to move back to this proven tradition of getting the big risk risks right maybe proactively manage them but be very permissive and all almost have less affair with the smaller risks because that enables innovation thank you that that does deserve deserve an

applause and maybe um Hans you mentioned that next week we'll start working on really defining the next steps forward. Can you give us already a glance what that could uh entail and how uh we could move forward to make Crypto Valley great again? Well, that's that's obviously um um subject to um the input and the agreement from from the other societies and the associations. I think this by the way is important that we um work more closely together. That's one of the feedbacks we got from from burn time and again that there's a cacophony um of contradicting positions and uh this is crucially important that we um

align ourselves um in in in the key messages otherwise we will not be be understood. So um I'm a little bit reluctant to um um to to to make announcements here before this discussion has taken place. These are these are um basically my ideas or um ideas from the blockchain federation. Um but I think one major major work stream will be um working together with the with the safe um um for this upcoming uh legislation.

this has happened already. I mean that that that that was a a highly highly constructive um iterative process um that that was triggered last fall um where um various members of the associations in their personal capacity could could provide input and um and this input was wasn't overly nice but it was heard and understood and that's greatly appreciated. That's greatly appreciated. So, we're looking forward to to hearing more. We did there was another work stream um on on on a specific compliance topic that I think was always also very very very constructive, extremely

extremely useful and we look forward to seeing to seeing the the draft. Uh we will um work on this one. And I think um one one of the topics we've identified and I think you also mentioned that that's a certain lack of precision in in in uh in our regulation um that is resulting in in in uncertainty and I think what we will try to do is is work very very thoroughly u through this draft and try to identify in the consultation process um stuff that that needs to be improved. That's hard work by the way and that's not done by by just reading reading it. That's that's um hard work. But I think if we combine

our resources and our knowhow, we should be able to to to provide input and that's better than than after the fact wine about about bad bad laws or bad bad regulation. So that's one thing. Another topic that is dear to my heart is um is is technical compliance. Um my personal view is that the way we do compliance today um isn't isn't very effective. I mean we're collecting papers and and then they are staring at this paper and try to insert some um intelligence from this paper. Um, and uh, I'm deeply convinced,

and by the way, I'm not a compliance guy. I'm I'm a lawyer, but I'm deeply convinced that there are more intelligence way to do that. And I would like to or I will propose that we that we trigger um um a work stream that thinks about what can be done and this is something that needs to be come from the industry. Um, that's not something we can ask Finma or or or or Parliament or or SE to come up. we need to to try to figure out um what what this is about. So these these are these are ideas but I think it's important to have a an open process where these uh these ideas are collected where um a decentralized process where we are working through and by the way if

any one of you has an urgent idea please let us know. So this isn't a closed loop um system. Uh we are inviting uh everyone who wants to contribute. And by the way, we we have currently three sponsor organizations. There are two more organizations that are or that will um officially support um this this manifesto. And we are inviting any organization to to contribute to work on on on topics uh that that are important to them.

Um, as I mentioned, there are different different interests sometimes. I think that's that's obvious when it comes to stable coins. Not everyone in the industry loves stable coins. Um, so so so it might not be possible that everyone is supporting our position with respect to stable coins, which is just make it happen. It's so important. Just make it happen. Now um not everyone is capable of supporting that but they are capable of supporting other um other items. So that's that's that's the process and I think that's the direction I'm envisaging. Thank you Hans. So key message is come to us and help us and

then may I may I just add do those good things right and but then also talk about them. Yeah. Yeah. And then because once once and I'm sure we can we can we can sort it out but then once we have also talk about it and I think that is not like has not always been our our strongest suit in Switzerland. Also look if you look at the panel's title right like I mean we can also learn from others. I mean they are allowed that is not our in our DNA. We are humble we are you know modest and but maybe sometimes we're just too humble. We are two models and we forget also a bit about our strength which is one example. I was with uh with 40 fintexs in Riad last November for the first uh Swiss Saudi

fintech forum and and then we got shown around and then they uh they they talked uh about a program that they have de developed and it had some fancy name you know entrepreneurship booster or something like that and then everyone asked you know we should have that too you know like oh you get like a salary for a couple of months so that you can you can really devote your time to become an entrepreneur. And then I thought about that and then a few, you know, like and they're like we already have that. It's called unemployment insurance where and you get you you do get like I think like about like three or four months of of of salary and you you can devote your time

to become a we have exactly that but just no one talks about it, right? It's this is it's just one one tiny example. I'm not entirely sure the labor office would share your your view, but it's an interesting and innovative approach. No, but seriously, the it's it's it's it's one feature under the unemployment insurance scheme which which helps you to become an entrepreneur, but no one talks about it. We already have that. Okay. But one other story um make the crypto value or make the Swiss Financial Innovation Center greater again because I think I truly believe it's it's already great that uh it it requires it also requires um

a a strong commitment. We have heard that you know from everyone you know where where can we pivot where is our unique selling proposition um and uh and we we can't get an executive order you know as as we have we we see that in in the states there have been many some of them I've I've read uh and they go in they actually go in the right direction some don't but that's another story and uh and in one of the in the executive order um 14178 in January it also says you know, everyone should have access to banking services and I think that also in the digital asset area, it's a huge issue at the moment. I I'm I was working for a unicorn in Austria and I tried to

open I tried to find a bank account for them. It was that was like a six-month journey and that just can't be it, right? Not in Switzerland. That just that has to be also looked at and perfectly right this is unacceptable. This is completely unacceptable. Um again I don't see a silver bullet. I mean banks are reacting to the costs that come with uh with opening bank accounts but as a as a as a situation this is unacceptable. This is missing in the in the manifesto um for you reasons you might um envisage um but but I would I fully agree with you completely unacceptable.

I hope the the next panel which is consisting of a couple of banks listens to us and and will have something to say why it takes so long to open a bank account. But um to to summarize, Lucio, would you have a few a little guidance for for us all how we can contribute and and uh help? Yes. So there's always a dilemma as an entrepreneur or as a financial institution especially. You cannot directly criticize the regulator or regulation because a client that has a choice between going to two different pizzeras and they know one of the pizzeras is always criticizing the food rules and

the hygiene rules then you probably go to the other pizzeria. So that's why it's very important to have organizations like the crypto value association, the Swiss blockchain federation where you can exchange your concerns. Maybe they are valid, maybe they're not valid. you can build a consensus and then you can produce something like the manifesto where that's also helpful to cif that not everyone goes there that you get a condensed input with what is the consensus among the industry and and uh you already know then this is something valid and of course everyone is welcome to join these organizations and to contribute I think for Swiss blockchain federation uh the only condition more or less is that you are in the blockchain

space and that you are based in Switzerland and then you are free to join and uh can contribute to in many of the working groups that we have in uh compliance taxes uh uh many other concerns with public consultations we take part so there's a lot of work that can be done and Switzerland also offers a lot of ways to contribute whenever the law changes whenever an ordinance changes there's a public consultation and and uh Nicholas and his colleagues actually read the comments This might be different in other countries. So this is unique in Switzerland, I think, because if you look, I I've seen a consultation in Germany about the AML law. It was 100 pages of text like

paragraph XY uh is changed like this. We add the word or in between as it's completely out of context. It was very hard to read. Consultation period 7 days. You have no chance to have a substantiated input. And in Switzerland that we did the blockchain law for example I think consultation period was three months or so if I remember correctly and we could create a substantiated input and and it was read and listened to and there was a constructive process and discussion. I think this is great and we should make use of this opportunity.

Thank you Lucius. And uh now we have here the QR code that you can scan to actually get to the 12point manifesto. So please please take a look think about it and come reach out to us and and uh help us all to to achieve the goal. Um are there any questions from the audience? Well if not maybe I have a quick run through through the panel and ask you one question. If at the Crypto Valley conference in 2030, we are sitting back here in this round and you start the sentence with, "Oh, great that Switzerland did this and this." What would it be?

What's the start? Okay, that's um that's a tough one. As as I said, it's it's it's really um um um um comprehensive um approach you need to take. Um um but perhaps the most important one and you mentioned that is speed up. We need to speed up compared to many competitors. We are we are way too slow and that's that's true for uh for for coming up with policy decisions and of of course that's our nature that's our system. The the result is that they may be better.

Um but that's also true for licensing. This is also something that that needs to speed up and this is simple project management uh that you can can do this stuff uh in in in in six months instead of 18 months. That's simple project management and that's something that that is really really important. Um um Asians or or Americans they simply don't get what we are doing here. They they really they really think we are sleeping sleeping or are on vacation all the time.

Um I think there is a question in the audience questioned because what happened? May I take this one? FTX um Terral Luna and Credit Swiss. Um so I think you know and many other many other things. Um I think together with the geopolitical uncertainty and and and just so many further developments it it resulted in an environment where we are

very risk focused and we have to manage uncertainty. We have to manage risk and then we are just completely absorbed and have a bit less time for innovation because what happens to innovation you know if you if you're in a survival mode um it it it just doesn't get the attention it should. So um if and maybe then just to answer your question before if I had a magic stick and if we were to to forward time um by five years I wish that we had um KPIs that we and you know KPIs for everyone for innoc certain associations for the parliament

whatn not but having KPIs maybe they can't be reached but then if you don't reach them you know you you have to be accountable and you you then talk about why you cannot reach your KPIs and I think um and and KPIs with regard to innovation with regard to growth with regard to um fostering uh prosperity that would be my my wish. That is a great idea. Um quickly Nicola any thoughts good things in five years? Um so so I think we had this this moment of euphoria right uh uh some some some years ago and I think now things are slowly slowly building we heard as well

pilots from the SNB quite some other stuff that are really interesting and I hope you know in five years time um we'll recognize this technology is to stay and it's being used as well um in a responsible way. I mean I I said that at the beginning but I think it's really important to position the country as pragmatic and or but responsible right um I think we cannot allow to have abuses to have to have um some some bad press as well. So so I really hope uh blockchain will start to be used more and more as an infrastructure as well.

uh we'll see really cool stuff on it and the position of Switzerland will be clear and will be like the uh the hub for responsible blockchain. Thank you. Yes, I I hope that we get this balance right between the big and the small risks and I think we we have the tradition to get that right and uh we we can do it. Awesome. Thank you everybody again. Big big