Dhe Swiss canton of Zug has long been known primarily for its low tax rates. Meanwhile, the area south of Zurich also stands for its pioneering role in the field of digital currencies and the Blockchain technology. The steady influx of smart developers and digital adventurers made the region on Lake Zug the “Crypto Valley” – a catchy title with which the cantonal government is eager to advertise, but which it also supports with its own high-profile actions.
As of this week, companies and citizens can have their Taxes Pay with Bitcoin or Ether up to an amount of 100,000 francs. “As the home of the Crypto Valley, it is important to us to promote and simplify the use of crypto currencies in everyday life,” said Zug’s Finance Director Heinz Tännler, explaining this step.
If you want to use this offer, the tax authorities will send you the QR code required for this by email. The payments, which are immediately converted into Swiss francs and are therefore not intended to pose any risks to the state coffers, are processed by the local service provider Bitcoin Suisse.
A distributed database
The openness of the local authorities to the brave new crypto world has contributed to a real settlement boom in the canton of Zug, which began in 2014 – when Vitalik Buterin, the inventor of the most famous cryptocurrency after Bitcoin, settled there Ethereum. The decisive factor, however, was the liberal regulatory approach: the ambitious digital pioneers were able to launch their “Initial Coin Offerings” (ICO) without any problems and collect millions of dollars or francs to finance their projects.
However, a number of investors have burned their fingers by buying so-called tokens, a type of virtual voucher, because they followed fast-paced but unsustainable blockchain business models or fell for fraudsters. A blockchain is a distributed database on which transactions or contracts are encrypted and therefore stored in a forgery-proof manner and without the involvement of a central authority such as a bank.
Regulation has also been tightened because of the investment scandals and the black sheep in this industry. The ICO hype is over. “A five-page business plan and a colored website are no longer sufficient,” said Mathias Ruch in an interview with the FAZ last year. Ruch is the founder and head of the Zug-based investment company Crypto Valley Venture Capital (CVVC), which specializes in investing in start-ups whose businesses are based on blockchain technology.
After a market shakeout in 2018, many new start-ups came to Switzerland. “All key figures point upwards,” said Ruch. The number of companies dealing with blockchain technology in Switzerland and Liechtenstein rose to 919 in the first half of 2020, 77 more than at the end of 2019. Of these, 439 are in the canton of Zug, 161 in Zurich, 84 in Liechtenstein, 49 in Geneva and 44 in Ticino. The 50 largest companies reportedly had a market capitalization of $ 36 billion in mid-2020, with Ethereum accounting for the majority of this amount.
In September last year, the parliament in Bern approved “the adaptation of federal law to developments in the technology of distributed electronic registers”. This means that from this year on, a number of legal hurdles for applications of “Distributed Ledger Technology” (DLT) will be eliminated. This enables shared data management and bookkeeping with participants who do not know each other, as well as direct, electronic transfer of values within this network. A central authority such as a bank is not required in this system. With the new set of rules, Ruch believes that Switzerland has the most advanced blockchain regulation in the world.
The Swiss Confederation is of course not always as bright when it comes to dealing with new technologies as it is in Crypto Valley. “Switzerland slept through digitization completely,” complained Ruch, recalling that the World Wide Web was once created in the Geneva research center Cern. Despite the strong academization and the great financial strength in the country, hardly anything was made of it economically.