BFI Capital Group
Crypto Valley Keeps Marching On
Crypto Valley, the Swiss version of Silicon Valley, has weathered the storm of the COVID-19 pandemic very well. In fact, Crypto Valley has been among the beneficiaries of the crisis, as it further accelerated the global trend of digitalization. As crypto currencies and distributed ledger technology (DLT) applications gain broader acceptance globally, Crypto Valley continues to gain traction and momentum as well.
A “valley” of innovation and growth
Anyone familiar with the world of digital assets and crypto currencies will already have heard of Crypto Valley. It is a vibrant ecosystem in the heart of Switzerland, where a concentration of top talent, tech-savvy capital and a business-friendly regulatory environment have carved out a global leadership position in the world of blockchain and fintech, in particular.
Geographically speaking, Crypto Valley lies in the region between Zürich, Zug, and Liechtenstein. Benefitting from constructive regulations, competitive tax laws, legal stability, and a penchant for experimentation, the crypto community has found a natural home. With a tradition of financial prestige and a growing network of legal service providers, the emergent industry has been particularly innovative in the realm of DeFi, or Decentralized Finance – as opposed to the traditional world of Centralized Finance, or CeFi.
With close to a thousand prominent and cutting-edge projects based there, a legacy of innovation and progress is being built in Crypto Valley. This region, and Switzerland overall, stands to benefit from this development for many years to come.
Record Growth – CVVC Report for H2/2020
Our friends from Crypto Valley Venture Capital (CVVC) recently published their latest CV VC TOP 50 REPORT H2/2020 on the status and progress in this hub, titled “Record Growth in Crypto Valley”.
Here are some of the key takeaways from the report:
The total number of companies in Crypto Valley increased to 960 (previously 919) and total employment grew substantially to 5,184 (previously 4,780). In the second half of 2020, over 110 new companies were either founded or joined the blockchain and crypto currency space, while Crypto Valley now counts 11 Unicorns (i.e. projects valued at more than $1B,) among them Ethereum (valued at $157.2B) and Cardano (valued at $40.6B).
CV VC research also identified ten crypto hotspots in Crypto Valley: Zug, Zurich, Liechtenstein, Geneva, Ticino, Neuchatel, Vaud, Lucerne, Bern, and Schwyz. Zug continues to be the heart of Crypto Valley, as about half of all companies call it their home (433). The Canton of Zurich counts 178 companies, Geneva counts 57, Ticino counts 49, Neuchâtel counts 26, Vaud counts 32, Lucerne counts 20, Bern counts 15, and Schwyz counts 13. The Principality of Liechtenstein counts 83 companies.
Blockchain-based financial services, the Fintech sector and DeFi-focused companies in particular saw explosive growth over the last year, with the arrival of large institutional players and the broad acceptance of Bitcoin and other crypto assets in mainstream capital markets. As the report explains, DeFi, one of the fastest growing segments in this space, is “a user-driven financial system that uses smart contracts to allow people and institutions to pay, trade, lend, and invest directly with each other. Unnecessary middlemen are eliminated altogether. Users can select the transactions they want to make and get the same treatment whether they are a retail or an institutional customer.”
Crypto Valley is home to some of the most promising DeFi projects, including new lending platforms, brokerage services, liquidity provisioning, and NFTs (non-fungible tokens), and related exchanges. Among them are “Aave”, a prominent lending project, and Curve.fi, which enables direct exchanges between stablecoins.
Meanwhile, the push of so-called “legacy” financial institutions to catch up and participate in the crypto race by expanding their service offering into digital assets also dramatically accelerated over the last year. The rapidly increasing demand by retail clients for crypto brokerage and storage services has made it necessary for traditional banks to develop comprehensive digital asset strategies in order to compete and remain relevant. As the volume of crypto transactions increases, banks have recognized the need to build the infrastructure required to support it and they have also understood the competitive advantages of integrating distributed ledger technology applications into their internal operations too.
Furthermore, upcoming regulatory changes and updates will also continue to drive growth and attract even more decentralized projects and relevant technology firms to Crypto Valley. Switzerland is already a frontrunner in terms of regulatory clarity, and one of the first countries to provide guidance on Bitcoin and other crypto currency transactions as early as 2014. More recently, following Liechtenstein’s Blockchain-Act that entered into force on January 1st, 2020, Switzerland also set out to modify a number of existing laws, as part of its “DLT Legislation Act”, a move that will allow for the complete digitization of the nation’s capital markets. These changes, scheduled to take effect in August 2021, provide important incentives and regulatory cohesion that are seen as extremely positive for Crypto Valley’s outlook.
All these developments highlight the attractiveness of Switzerland and Liechtenstein for blockchain and crypto projects and companies, while the wider trends in the crypto space point to a very bullish outlook. As Mathias Ruch, Founder and CEO of CV VC, put it: “Society is becoming more and more familiar with blockchain and cryptocurrencies. Institutional investors are confirming the potential of Bitcoin and its underlying technology. Alternative investments such as crypto are becoming a part of many investor portfolios.”