Swiss Government Paves the Way for Entry of Crypto Banks

Swiss Government Paves the Way for Entry of Crypto Banks

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Franz Gruter, Member of Parliament of Switzerland, filed a motion to limit or moderate regulatory encumbrances of Blockchain start-ups by controlling the legal meaning of “Client deposit”.  23 other MPs from different major parties supported and signed said Motion.

Companies that handle finances of clients (Swiss Francs, Bitcoin or any other currency for that matter) are classified as banks. This is the policy even if the risk profile of such entities differs basically from traditional banking institutions. Bank classification comes along with regulations as well as capital prerequisites. This is practically not possible for start-up enterprises. It is only one possible reason why no crypto-currency exchange like BITFINEX or BITSTAMP operates in Switzerland despite the dynamic bionetwork of crypto currency start-ups.

Bitcoin Association Switzerland founder Luzius Meisser believes the proposition sends a strong signal to blockchain startups globally that the Swiss parliament wants the country to be at the vanguard of financial technology modernization.

Change of Mind

The Swiss Financial Market Supervisory Authority convinced MP Franz Gruter to change his mind. FINMA, which supervises the nation’s financial sector, was able to persuade the politician that this initiative will affect blockchain enterprises significantly and positively sooner than later. The regulation being formulated is meant to create a new class of financial institution rather than reduce the amount of capital that banks are compelled to maintain.

According to Franz Gruter, the concept of crypto bank made him withdraw his own proposal that could have changed legislation. Instead, the MP vowed to support these innovative financial platforms. He first learned about problems confronting these start-ups after being approached by Wences Cesares, chief executive officer of XAPO, a company based in Switzerland providing Bitcoin wallet combined with cold storage vault along with Bitcoin-based debit card.

Mr. Cesares, an IT expert and chairman of Swiss internet company, Green.ch received numerous complaints from Blockchain entrepreneurs. He solicited recommendations from industry stakeholders to provide better services. Meanwhile, Bitcoin Association Switzerland’s Luzius Meisser and legal counsel Andreas Glarner advised MP Gruter to open a Bitcoin account and purchase the digital currency.

Gruter and another Parliamentarian (Claude Begle) filed three motions related to Blockchain. Swiss laws provide FINMA can recommend three options. These are passage, disapproval or filing of counter-proposals. Gruter refused to repeal the bill until he was called by Wences Cesares.

Crypto Banks’ Future

Gruter claims he has limited information regarding these unique companies. However, a succession of public documents proved that crypto banks have a bright future. The Federal Department of Finance (Switzerland) released initial details of said project. This was after the SBB (Swiss rail operator) made public that it will start offering Bitcoin in its ticket outlets.

FINMA can approve FINTECH licenses with corresponding capital requirement of CHF300, 000 or five percent of the conventional public funds. Total amount of public funds that can be accepted by companies with licenses must not go beyond CHF100, 000. FINMA circulated a document that laid the structure by modifying corporate governance rules for banks before FDF released the licensing details.

This particular document underscored the application of specific policies which allow institutions to put into operation conditions that take into account contrasting business models along with risks connected to these standards. FINMA also laid out the Authority’s strategic objectives from 2017 until 2021. The document made clear the pro-innovation style in regulation and management. Another priority is to deal with potential risks. Long-term success of the financial sector in Switzerland will depend on the industry’s capability to become innovative.

Legislative Changes

The Federal Council of Switzerland ordered the Federal Department of Finance to accomplish a rough copy of the agency’s legislative revisions beginning 2017. Yet, there is no exact schedule for the completion. The FDF will collaborate with relevant offices to spell out particular provisions and reduce obstacles for financial technology start-up firms. MP Gruter perceives these developments as a complete shift in how the country looks at crypto-currency businesses. He also said his peers in parliament made up their minds to focus on benefits.

First of all, consumers need to know effects and threats of said technology. Government should consider eliminating risks as well as understanding the opportunities. It is not advisable to overstate one and neglect the other. MP Gruter claims he is concentrating on how to purchase the crypto-currency and monitor price shifts carefully after opening a Bitcoin account using Bread Wallet.

The Canton of Zug, one of Switzerland’s 26 Cantons located in the central part of the country, chose to accept Bitcoin payments for specific government services. There will be further assessment by the end of 2016.

Bitcoin Crypto Banks

The Bitcoin Crypto Bank operated in the trading market of Bitcoin. It is a private firm established in 2014. This entity managed more than $3 million worth of funds for institutional investors. It has been opened to private investors from different parts of the world. Funds are managed by Bitcoin investment specialists. In fact, numerous traders operate automated trading systems to keep track of the ebb and flow of similar monetary instruments. It acts promptly on inefficient pricing schemes. These are eliminated within a few seconds.

The popularity of Bitcoin is increasing daily. However, there is one question from the public. What can people do with Bitcoin currency?

There are several options. Bitcoin is used to buy merchandise online and in traditional retail stores. Users can save the currency in their respective Bitcoin wallets. It is not complicated since banks are not involved. Consumers can deposit the currency and make Bitcoin grow. You can invest the digital currency. There are open markets wherein thousands of this currency are sold and purchased on a day to day basis.

The problem is markets can be complex. It is quite hard to learn the processes of making money. Markets never close down because Bitcoin is all over the world. This type of market operates 24/7 and 365 days every year. The procedure of monitoring investments is tedious. What is the solution to this issue? Let the Bitcoin Crypto Bank investment firm deal with your investments. The fees are relative low while returns are high. This is the foremost advantage of allowing a trusted professional firm to handle such concerns.

Crypto Valley

There is a 30-kilometer expanse of land that starts from the City of Zurich to Zug Canton which was labeled as the “Crypto Valley.” It has emerged as attraction for Blockchain start-up enterprises and being compared to the phenomenal Silicon Valley in California, USA. The laws are progressive and taxes are affordable. The hiring ecosystem is very competitive. Entrepreneurs searching for tentative global legal atmosphere are enticed by this “Unique Mix.”

Major economies which include the United States, People’s Republic of China and the Russian Federation adopted stringent or uncertain regulatory attitude towards crypto-currencies. On the contrary, Switzerland espouses the Laissez-Faire attitude which is responsible for making the country’s banks controversially valuable. Crypto Valley is at the focal point of this movement.

The convergence of Blockchain start-up companies and projects is not a utopia or perfect system. Nonetheless, this union is a work in progress or promising venture in which bureaucracies, authorities and start-ups seek to adopt technology which is struggling to gain traction worldwide. This Blockchain platform consists of XAPO, the Ethereum Foundation in Zurich and Shape Shift. The latter is an instant crypto-currency exchange service. Shape Shift is a place for trading Bitcoin and Litecoin currencies even without accounts.

The Foundation supports and promotes research of Bitcoin technology. One organization involved is the Greater Zurich Area Economic Region, a public-private alliance helping tech corporations such as Google and UBER to establish their businesses in Zurich.

The Bitcoin Experiment in Switzerland was unleashed in Zug at the middle part of 2016 thanks to the federal structure of this country. The program enables citizens to make payments for government services using Bitcoin. The ceiling is confined to CHF200.

Blockchain Companies and Bitcoin

In 2015, Blockchain companies and Bitcoin put up an unprecedented high of $US474 million from 74 transactions based on reports from the KPMG auditing firm and CB Insights venture capital database. As investments continue to pour, some of the biggest banks and financial institutions in the world began exploring and testing the Blockchain platform. This move was designed to make processes more efficient and minimize expenditures.

Many analysts are convinced the Blockchain technology is capable of modifying the system by which banks and other industry participants make settlements and securities’ transactions. The platform guarantees transparency, efficiency, speed, and fast auditing. So far, Swiss regulatory authorities managed to address only a single app of Blockchain technology which is Bitcoin. Two years ago, The Swiss Federal Council issued a report on digital currencies but filed to propose specific regulations due to the insignificant economic magnitude of this currency. Blockchain has multiple applications in the FINTECH sector. Unfortunately, these have not been tackled or regulated by the proper authorities. Even then, there are many promising domestic Blockchain enterprises in Switzerland.

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