Swiss crypto companies that got their start early are now facing competition from traditional banks entering the digital asset space. In the past two years, crypto has started appealing to mainstream investors, leaving the early movers trying to hold onto market share.
The crypto market has seen extreme ups and downs recently. Just two years ago, the values of digital currencies bottomed out. But Bitcoin alone jumped 160% in value last year. Major Wall Street institutions also changed their tune, going from bashing crypto as speculative to eagerly awaiting regulatory approval for Bitcoin exchange-traded funds (ETFs).
With digital currencies gaining broader acceptance, traditional Swiss banks have started wading into the space. They are teaming up with regulated virtual assets specialists like Sygnum and SEBA to offer digital asset services to their retail customers.
Surprisingly, smaller cantonal banks like those in Zug and St. Gallen are leading the charge. Industry experts estimate around 10 Swiss banks are on the cusp of launching digital currency offerings, including the country’s largest bank, UBS.
Banking Giants Squeeze Switzerland’s Early Crypto Innovators
The encroachment by big banks has put pressure on Switzerland’s early crypto adopters. Last week, Bitcoin Suisse withdrew its application to become a licensed Swiss bank – a move driven largely by the changing landscape. CEO Dirk Klee stated that increasing competition prompted Bitcoin Suisse to fear revenue loss, dissuading the pursuit of a bank license.
Other crypto-first companies like Sygnum and SEBA may also struggle as they transition from being banks’ main digital assets service providers to facing direct competition from them. All crypto firms will have to adjust to new regulations around digital assets. More stringent capital rules for staking coins, for example, could hamper business activities.
Switzerland has embraced digital innovation in recent years. However, it may follow the path of the EU and UK in creating specialized virtual assets licenses rather than classifying digital assets under normal banking rules. Policymakers are apparently considering using existing fintech permits to regulate blockchain companies.
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