Switzerland’s Legacy Of Financial Freedom Makes It The Best Place For Bitcoin To Thrive
Switzerland values many of the core properties of Bitcoin and now the two are poised to create the future of financial sovereignty together…
As a Swiss citizen, it didn’t take me long to understand why Bitcoin is unique. Switzerland is a country that values lots of the critical aspects that Bitcoin offers to people. The small country in the middle of Europe encourages self sovereignty, privacy and financial literacy. The pioneering Swiss banking secrecy was codified in 1934. This regulation, along with its political neutrality and enduring stability, makes the country a “safe haven” for companies and institutions that deal with money.
However, there is one critical flaw: What’s the point of using the most trustworthy place in the world to store your money when the money itself is broken? Particularly in recent years, we have witnessed reckless behavior by governments and central banks across the globe. Tumbling from one crisis into the next one, it seems that no matter the obstacle, more liquidity has been (and continues to be) the solution from politicians. This is one of the reasons why price inflation is rising in developed nations, and is completely out of control in developing countries.
Bitcoin is a solution to this problem. Bitcoin is the ultimate pristine asset, capped at 21 million units, not centrally controlled, genuinely neutral and global. It’s a monetary good that can be best described as “digital gold.” And, on top of that, it will act as a foundational layer for a new global financial system.
I still remember my first real employment, which, ironically, was with one of the biggest national banks in Switzerland, called Raiffeisen. It was also when I first tried to understand how money and our financial system worked. I asked the bank employees and managers deep and intriguing questions, like probably no 21-year-old intern had before:
Why can the bank just create money out of thin air and lend it out to people for a profit?
What is fiat money backed by?
Why can banks just speculate with the savings of their customers and then get bailed out when they fuck up?
It always struck me how low on substance and high on bullshit the answers were and quickly, I realized that most of these bankers working for the money machine didn’t actually understand how it works. I came to the conclusion that the reason why it works in Switzerland was the high-quality standards, credibility and work ethics of the Swiss people, coupled with the country’s very stable regulatory and political system. These are clearly characteristics that set this nation apart from almost any other one in the world. And, for the same reasons, I think it is why Switzerland experiences among the lowest inflation rates and unemployment rates.
So, it has built the most fertile ground worldwide for the Bitcoin industry — and, finally, sound money — to flourish.
HOW SWITZERLAND IS BEATING THE EUROPEAN UNION
While Switzerland is in the middle of Europe, it always opted to stay sovereign. This also shows up in terms of the different approaches to regulating Bitcoin. One of the biggest differences between Swiss regulation and the European Union’s Markets in Crypto-Assets Regulation (MICA) is the implementation of the Financial Action Task Force’s (FATF) “travel rule.”
Switzerland’s travel rule, implemented by the Swiss Financial Market Supervisory Authority (FINMA), requires virtual asset service providers to verify the identity of the beneficiary of the transfer. Meanwhile, Europe’s version of the travel rule requires crypto asset service providers to apply enhanced due diligence measures when transactions involve self-custody wallets. What this means is that custodial services that operate in Europe will have to transfer huge amounts of data in order to comply with the much more demanding European travel rule.
Another one of the advantages of Switzerland is the “kassageschäft” framework. Originally used for exchanging physical coins and banknotes of national currencies, it also applies to Bitcoin. Therefore, you don’t need KYC/AML registration to exchange cash in Switzerland, and luckily it fits the digital age as well. In recent years, FINMA has lowered kassageschäft limits for bitcoin compared to physical coins and banknotes from 5,000 CHF per day to 1,000 CHF per day and now is trying to push the limits to 1,000 CHF per 30 days, a move that has been met with skepticism by Bitcoin companies in Switzerland. But, compared to other countries, the Swiss government has shown time again that it’s willing to talk and collaborate with Bitcoin companies to find the best solution for all.
WHY MANAGING RISK MATTERS MORE THAN EVER
One person’s asset is another person’s liability. This basic rule in the world of finance became very real for a lot of cryptocurrency investors in 2022. Some of the biggest (and in terms of marketing, the loudest) names in the industry collapsed last year, taking customer funds with them into the abyss.
But it was not only FTX, BlockFi and other crypto platforms that showed us that your assets are only yours as long as the respective third party says so. The banking crisis in Lebanon, rampant inflation combined with financial repression in Argentina and the loss of access to banking services because of political reasons around the world are very real. This all shows us one thing: counterparty risk matters, especially in the uncertain geopolitical future that we are heading into. We’ve seen that USD treasuries can be quickly frozen and sanctioned. The same goes for stocks or any other asset, including real estate, that people hold in other countries. While this has been the U.S.’s soft power of choice, investors have surely taken notice of the downsides of counterparty risks.
It matters more than ever that Switzerland is the most trusted place for money on the planet. It has always been open to innovation, technology and international finance. Furthermore, it is, both from a regulatory and political perspective, very decentralized and community driven. Switzerland consists of 26 autonomous cantons and offers its citizens true direct democracy. When taking a closer look, the similarities between Switzerland and Bitcoin are striking: Any Swiss citizens can start an initiative to change the federal constitution, and if they manage to collect at least 100,000 signatures, the whole country will vote for it, almost like a Bitcoin Improvement Proposal (BIP).
It should come as no surprise then that Switzerland plays a crucial role in the Bitcoin market today, known as a “crypto nation,” with Zug as the “Crypto Valley” and Lugano with the “Plan ₿” initiative, hosting hundreds of companies and thousands of employees working in this space.
Particularly Lugano, Switzerland’s ninth-largest city with a population of over 60,000 located in the Italian-speaking southern region, shows how Bitcoin innovation and adoption should be done: in a curious, open and grassroots way. Lugano Mayor Michele Foletti is not afraid to take the leap here, to show the world firsthand why the decentralized Swiss governance model enables projects like the advent of a bitcoin-focused city. More than 100 merchants, restaurants and bars accept bitcoin in Lugano. It’s expected that soon, taxes can be paid in bitcoin (and other cryptocurrencies), which means that it’s very easy to seamlessly delve into a new, open monetary network.
THE TRUST CRISIS IS AN OPPORTUNITY FOR BITCOIN AND SWITZERLAND
Public trust in institutions like (central) banks, politics and legacy media outlets is at its lowest point in decades. In particular, younger people are looking for new answers. According to a recent survey, 45% of millennials said they prefer bitcoin to stocks, gold or real estate. More than half (51%) of millennials said they have more faith in Bitcoin than in financial institutions.
This is bullish for Bitcoin. However, there are still obstacles. The tedious onboarding process, complicated user interfaces, lousy customer support and lack of self-custody solutions are still a reality for newbies interested in buying their first bitcoin. It’s clear what we have to do to get bitcoin in as many hands as possible: make buying and selling it easier. Get rid of all the hindrances, and allow anyone to stack sats in their own, self-hosted wallet, directly.
Bitcoin is about long-term thinking, about saving. And people are desperate for ways to save money that they can genuinely trust again, solutions that don’t get eaten away by inflation or high fees, solutions that are ready for the digital age and that can’t be frozen or censored in any way.
I believe that Bitcoin is a force for good that can accelerate financial and, therefore human, freedom. Going forward, Satoshi Nakamoto’s invention will play an integral role not only as an asset without counterparty risk but also as an alternative financial layer that can host a wide range of services.
THE FUTURE OF BITCOIN-ONLY IS BRIGHT, IN SWITZERLAND AND BEYOND
True to its history as a place that fosters financial innovation instead of killing it, Switzerland will thrive in a world that is increasingly embracing Bitcoin.
But despite the growing recognition and adoption of Bitcoin by the financial industry, it remains a bottom-up movement driven by its community of users, developers and enthusiasts. They are committed to the principles of decentralization, privacy and financial freedom and work to promote the use and adoption of bitcoin as a digital currency. The community is active in organizing meetups, forums and events where it can share its experiences and knowledge with others and work together to improve the technology.
Even in the European Union, where the will to innovate with Bitcoin seems less determined, Nakamoto’s innovation will thrive. With a coherent regulatory framework on the horizon, Bitcoin is set for a bright future in Europe — no matter how hard some politicians want to fight it. Despite an ongoing energy crisis and attacks on Bitcoin’s energy consumption, it’s clear that there will be demand for an asset like bitcoin. High price inflation, financial repression and a looming euro-based central bank digital currency will drive adoption and demand.
Wed, 08/30/2023 – 03:30