The Swiss say yes to Bitcoin

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Following on from our webinar about Bitcoin in Switzerland, there’s been some movement in the Swiss Bitcoin space. The Swiss regulatory authority, FINMA, has chosen to authorize SBEX, the Swiss Bitcoin Exchange. SBEX, founded in February 2014, operates an offline brokerage service for buying and selling Bitcoins, but has ambitions to expand its service to include an online brokerage and an extensive network of Bitcoin ATMs.

As a result of FINMA’s ruling, Bitcoin transactions can now be considered to be a payment, and deposits of Bitcoin can be considered as bank deposits. It is, in a sense, fitting that Switzerland should be an early mover in regulating Bitcoin; its reputation as a safe but confidential banker to the world will add credence to Swiss Bitcoin brokers and may spur other governments to make similar moves.

However, Switzerland must be careful not to allow exchanges such as SBEX to self-regulate too freely. Should such services be found to have enabled illegal or undesirable transactions, the fallout could cause problems for Swiss foreign relations, especially in the wake of recent tensions over tax evasion.

On a related note, the European Banking Authority (EBA) have issued an official opinion document on virtual currencies (VCs). In terms of regulatory advice, the EBA takes a cautious line, encouraging long term legislation and a short term avoidance strategy. The EBA wishes to shield currently regulated financial services from VCs until legislation and governance experience can catch up with the strides made by the new technology.

In the meantime, the obligation for legal requirements such as the EU Anti-Money Laundering Directive should, in the opinion of the EBA, be put on the operators at the interface of conventional and virtual currencies. In other words, brokers such as SBEX. It’s clear that European and Swiss regulators are trying their best to balance the risk of virtual currency with the potential reward it could hold. This is especially true for the Swiss, who could potentially find their vital financial services sector bypassed by these new technologies.

The opinion document by the EBA takes a classic ‘wait-and-see’ approach, mirrored by the earlier report of the Swiss Federal Council, which decided not to propose new statutory provisions. The reasons given were that ‘virtual currencies like Bitcoin are of only marginal economic significance and are not in a legal vacuum’. We certainly agree with the former for the moment, but the latter reason is a bit more nuanced. The Federal council also assert that ‘virtual currencies carry substantial risks of loss and abuse for users’.

What we’d be interested to know about is the specific legislation they might consider in future. But this might yet take a great deal of time and debate to emerge.

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Cryptocurrency – Building a new business model based on safety rather than secrecy

As global financial centres such as Switzerland grapple with the need to reinvent their business model, Shift Thought recommends a way forward that will enhance rather than challenge reputational branding.

 

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A Big Thank You from the team at Shift Thought

A big thank-you for the huge interest and support for our webinar Digital Money: a new business model for Switzerland. We also take this opportunity to thank the UK Trade & Investment for this opportunity, and in particular Anna Faber, Commercial Officer - Technology & Innovation, who was a source of inspiration and support, and without whom this would not have been possible.

The recording is now available at this link

On the webinar we reveal our thoughts on an architecture that could form the basis of a new business model to innovate in the context of cryptocurrencies. Some of the questions we addressed within this recording are:

  • Do we see similar challenges in implementing Bitcoin, as encountered for the Euro?
  • Which type of digital money has the greatest potential for the future?
  • Do you think digital money should be regulated? Is this possible? How?
  • What do you view as the biggest problems with Bitcoin: technical such as the ability to scale, regulatory such as government reactions or business model fit?
  • Would you agree that ultimately only one cryptocurrency will exist?
  • Are some banks more ahead of the game than others when it comes to digital money?
  • Do you see a service like PayPal as being threatened by Bitcoin or enhanced by it?
  • What would be the first step for a "traditional" Swiss private bank to take an interest in Bitcoin & cryptocurrencies?
  • Are some banks ahead of the game more than others when it comes to digital money ?

Our next blog offers further answers to some of the questions covered on the webinar. We also received a number of follow-up questions and these will be answered in depth by Dr. Neeraj Oak. We invite you to participate with us as we explore the development of this critically important topic. It would be great to make this a dialogue in which people from around the world can join.

We have therefore created the Digital Money group on LinkedIn

Please join this group today, to add your unique perspective to the body of knowledge being created. This group brings together news and views on how digital money is changing the way people pay around the world.

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Swiss Financial Services– preparing for the biggest transformation in 80 years

Shift Thought studies lead us to believe the Swiss Financial Services industry is on the cusp of the biggest transformation it has seen in 80 years. In this blog we share a bit about what leads us to this conclusion and our upcoming Free Webinar that we hope you will attend.

 

imageOver the years Switzerland has carved out a space for itself as a renowned country that exemplifies a unique system of Direct Democracy, precision and innovation.

A part of Europe, yet apart, it is currently seeking to define it’s relationship as a major trading partner of the EU.  This is now defined through a framework that consists of over 120 agreements. However, a Swiss vote calling for curbs on immigration led to EU restrictions and questions regarding a range of agreements based on Swiss commitment to free movement of people.

Recently found to be the most expensive country in the world, the high cost of living is often associated with the large number of super-rich foreigners who have made Switzerland their home. New rules for the super-rich must walk a tight-line between attracting foreigners and satisfying growing concerns from the locals.

To add to this, in recent times there has been intense pressure on Switzerland from the USA and India, to release information on their citizens who may seek to avoid paying tax back at home, and worse still, conceal assets that represent “black money”.

Finance Minister P Chidambaram this month warned that India would take a position at the upcoming Global Forum, to call for more effective exchange of information. Earlier the US has brought action on some of the largest Swiss banks, relating to allegations regarding tax evasion activities by US citizens.

All this calls into question the well-established Swiss financial services model that has developed and evolved over the years, since the introduction of the legendary numbered bank account in 1934.

 

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However, whilst pressure mounts on Switzerland, there is a simultaneous ground-swell of new payments products and services (NPPS) that we at Shift Thought continually study, as they evolve in each part of the world. I am just back from our market studies in India and Singapore. In the production of our reports on Singapore and Switzerland I have been continually struck by the parallels between the two countries. Emerging countries around the world present an opportunity and a threat for the Swiss Financial Services model.

And then there is Bitcoin. In thinking about Bitcoin, I am reminded of the song How do you solve a problem like Maria? from the evergreen movie The Sound of Music, where the von Trapp family hikes over the Alps into Switzerland and to freedom. Unfortunately the Bitcoin conundrum is not as easy for Switzerland to resolve.

All Digital Money is not Bitcoin, and Bitcoin is more than Digital Money

As innovative start-ups such as Monetas choose to make Switzerland their home, our upcoming Webinar touches on what the development of crypto currencies means for the country. We place this in the context of a wider set of new payments products and services and the opportunities and risks when providers create strategies around these.

 

viewport_switzerland_2014I’d like to invite you to join us for a free webinar I will be conducting for UK Trade and Investment (UKTI) on Tuesday the 27th of May 2014, from 2:00 pm to 3:00 pm BST.

Register here : Digital Money: a new business model for Switzerland

I shall share some of our findings from our recent report on Digital Money in Switzerland 2014 and ourGuide to Bitcoin and crypto-currencies 2014” . Read more at our previous post.

 

 

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Digital Money: A new business model for Switzerland

Mon, Mar 24, 2014 2:00 PM - 3:00 PM GMT

Shift Thought is working with the UKTI (United Kingdom Trade & Investment) to present some country-level options for balancing risk and innovation, while creating sustainable consumer services for the future.

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In this webinar, Charmaine Oak, the Digital Money Practice Lead at the UK-based management consultancy, Shift Thought, will discuss some of the recent innovations in payments and remittances services. She will provide insights from recent Shift Thought research on Switzerland, UK, Singapore and other markets around the world.

This will focus on opportunities for UK-based companies to prepare for requirements common to countries such as UK and Switzerland that are seeking to innovate for the future.

Shift Thought tracks innovations across a wide range of services they term as Digital Money. Shift Thought believes that balancing innovation within an overall framework of regulation is of paramount importance. This helps to create sustainable long term growth, both of individual organisations as well as for a country as a whole.

Mistakenly some people tend to confuse this with Bitcoin, which is only one form, of one of the many dimensions across which innovation is possible. Bitcoin is a decentralised crypto-currency that represents one kind of disruption. It is positioned as a potential way to do low cost transfers, but governments and central banks have expressed concerns regarding potential risks to consumers, as well as on fundamentals surrounding the operations.

This webinar touches on the much broader possibilities for innovation in payments and remittances. It aims to enhance the level of co-operation between UK Financial Service and Payments providers and the Swiss ecosystem.

It will do this by offering insights into the changes affecting the Swiss market and the ways in which countries such as Switzerland are approaching a range of innovative financial services.

The presenter will cover areas such as:

  • Creating a sustainable context that balances innovation and risk, to create services that build reputation
  • How could Switzerland use its unquestionable strengths to create such innovations that consumers really want?
  • What opportunities might British businesses draw from the transformation in the financial services approach in Switzerland?

This webinar will be of interest to audience in the Swiss financial services sector as well as to UK businesses who wish to cater to the needs of the Swiss financial sector.

However, the innovation and risk balancing theme addressed is likely to be of broader interest to regulators and payment professionals across the world, and in particular in countries such as Switzerland that are also in the process of creating enabling environments for financial services of the future.

 

Further details and registration is available at Digital Money: a new business model for Switzerland.

 

Background reading: See our previous blogs, What is digital money? and   Bitcoin - Fan it or Ban it? , and also browse for more about the different virtual currencies and get an understanding of other such initiatives at Bicoin Search Results.

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