SWISS DIGITAL ASSET AND WEALTH MANAGEMENT REPORT 2021 - WRITTEN BY ALEXANDER E. BRUNNER PUBLISHED BY CV VC AG
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First Swiss Digital Asset and Wealth Management Report 2021
SWISS DIGITAL ASSET
AND WEALTH
MANAGEMENT WRITTEN BY
ALEXANDER E. BRUNNER
REPORT 2021 PUBLISHED BY CV VC1AG
First Swiss Digital Asset and Wealth Management Report 2021
FOREWORD BY FORMER SWISS
PRESIDENT JOHANN SCHNEIDER-
AMMANN
hen I proclaimed “Crypto Nation
W Switzerland” three years ago, I was
convinced of the innovative potential of
blockchain technology. However, I honestly did not
expect Switzerland to establish itself as one of the
leading and most dynamic blockchain nations in the
world in such a short time.
This result is primarily due to openness and
foresight. Swiss politics, in particular, has shown
a lot of pragmatism. The Parliament unanimously
approved punctual adjustments to existing legal
structures in record time and made new distributed
ledger technology (DLT) legislation possible. This
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rapidly changing blockchain technology and its
application into the existing legal framework.
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Switzerland’s new legislation provides legal certainty Management Report 2021” impressively shows,
and, at the same time, the scope for innovation KH6ZLVV4QDQFLDOFHQW
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and new business models. The US and China, the the new digital world but is perfectly positioned.
primary technology nations and competitors, admire :LW
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this approach - not just because Crypto Valley’s focus SODW IRUPVW
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on legal certainty, curiosity, and cooperation has Nation Switzerland” can secure a leading position.
allowed it to grow into a thriving ecosystem with
over 960 companies and 5,200 jobs. Johann N. Schneider-Ammann was a Federal Councillor
and Head of the Federal Department of Economic
The new DLT trading license goes very far in $‹DLUV(GXFDW
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terms of content and allows trading, custody, and 6LQFHW KHIRUPHU3UHVLG HQW RIW
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certain payment transaction activities. This could Confederation has been a member of the Board of
FUHDW HDQH[FLW LQJ4UVW
PRYHUDG YDQW DJH–QJOREDO Directors of the Zug-based investment company CV VC.
competition, Switzerland will be streets ahead of
other jurisdictions.
2
First Swiss Digital Asset and Wealth Management Report 2021
FOREWORD BY THE PUBLISHER -
MATHIAS RUCH, CEO AND
FOUNDER OF CV VC
hen we started our activities in 2016,
W something quickly became clear:
Blockchain is not only a huge opportunity
for us as entrepreneurs, but also for Switzerland
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pioneers and projects reached Switzerland from
2017-2018 in the ICO hype, which triggered global
regulatory trends soon after. Today, Switzerland is
in an excellent position, with arguably the world’s
most progressive legal framework, regulated key
players, and a vibrant community. I am convinced
that with this starting position, the way is paved for
the second wave: the one of digital assets.
MR
It is a great pleasure to support the publication of
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an investment company that invests in early-stage
VWDUW XSVZRUOG ZLGH:HKDYHFUHDW HGRXUHFRV\VW HP cryptocurrencies. Thanks to tokenization, new types
with co-working spaces, events, community services of investments are emerging. Demand for these
and incubation programs in Zug, the heart of QHZ4QDQFLDOSURG XFW
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connect all players from industry, politics, science, a number of players in Crypto Valley who anticipate
and society. the new business areas and are active at the global
forefront.
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we launched the CV VC Top 50 Report, which has I am convinced that digital assets will establish
now become a standard publication. It surveys the themselves as a new asset class. Next-generation
crypto and blockchain ecosystem in Switzerland trading platforms will emerge and Switzerland,
and Liechtenstein, lists the number of companies with its leading crypto and blockchain players, will
involved in blockchain, researches the number of SOD\DFUXFLDOUROH:K\"%HFDXVHW KH\ZLOOG UDZRQ
jobs created, calculates valuations and ranks the 50 KHW
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largest companies, including 11 unicorns in the most VHFW RULQ6ZLW ]HUODQG7KLV4UVW 'LJLW
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recent edition. Anyone concerned with Crypto Valley is a guide and source of inspiration for the capital
and Blockchain Nation Switzerland can’t miss the CV market of tomorrow.
VC Top 50 Report.
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DO$VVHW 5HSRUW ZHDUHSXUVXLQJW KH entrepreneur and investor in the digital startup scene
same ambition: together with Alexander Brunner IRU\HDUV+HIRXQG HG
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and the Swiss Blockchain Federation, we want to companies in the digital startup space. Today he is a
FUHDW HDQHZUHIHUHQFHSXEOLFDW LRQIRUW KH4QDQFLDO driving force in the development of a global blockchain
industry. Digital assets are much more than ecosystem and co-founder of the Swiss Blockchain
Federation.
3
First Swiss Digital Asset and Wealth Management Report 2021
FOREWORD BY THE AUTHOR - is based on interviews with more than 80 providers,
ALEXANDER E. BRUNNER investors and experts based in Switzerland. Mark
Branson, former CEO of the Swiss regulator FINMA,
hen I published my book Crypto Nation kindly gave an exclusive interview. The report is
W Switzerland in late 2019, the ICO craze
of 2017 had just turned into a severe
aimed at investors, big or small, who are pondering
how to invest into cryptocurrencies and digital
“crypto winter,” with bitcoin crashing from almost assets. It shall enable investors to get more familiar
RVOLJKW
W O\DERYH:KLOHPDQ\LQW KH with this nascent and highly innovative asset class.
community were nursing hefty losses, the traditional The report also shows the breadth and width of the
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V–W
ROG\RXVRPRPHQW Swiss digital asset ecosystem, which is growing at a
Many industry observers, including the Financial rapid pace. Yes, Switzerland is at the forefront of this
Times, were convinced that this was the end of the incredible development. This presents a tremendous
remarkable and breathtaking story of bitcoin and RSSRUW XQLW\IRU6ZLW
]HUODQG DQG KH4QDQFLDO
W
other cryptocurrencies. Right up until November ecosystem overall. However, the global competition
2020, the Financial Times wrote that the “promise is not sleeping.
of bitcoin has proved to be elusive.” Little did they
know that digital assets would come back with a So what are digital assets: a new digital gold or just
bigger bang than ever. In 2021, leading investors and “thin air,” as former private banker and fund of
hedge-fund titans from Paul Tudor Jones and Stanley IXQGVPDQDJHU(UZLQ%UXQQHUVDLG ":KRDUHWKH
Druckenmiller to Ray Dalio would acknowledge the SHRSOHEXLOG LQJW
KLVQHZ4QDQFLDOLQIUDVW UXFW XUHDQG
viability of bitcoin. Innovation happens in leaps and ZKRLVLQYHVW LQJLQLW"7KRVHDUHTXHVW LRQVW
KDWVKDOO
bounds. be answered in this report.
On the 4th of January 2021, the Financial Times Alexander E. Brunner,
changed its stance and wrote the following headline author
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year of Covid-19, it has also been the year of bitcoin. University of St. G
allen
Indeed it is the year where bitcoin has come of HSG . Brunner worked for
age.” Furthermore he wrote “...this (2020) is the year many years in alternative
bitcoin has become investible for institutions with investments and family
custodian arrangements available from the likes of R]FHV”QKHSXEOLVKHG KHERRN&U\SW
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Fidelity and with prominent hedge fund investors 1DW LRQ6ZLW ]HUODQG 7RGD\KHZRUNVDVDQDG YLVRUW R
declaring that they have bought it.”1 2020 was also international deep tech startups and is a member of the
the year when many bankers quietly changed their parliament of the City of Zurich. He is also the founder
tune from highly sceptical to positively interested, no RIWKH8UEDQ”QQRYDW LRQ$VVRFLDW LRQZKLFKHQDEOHV
longer being able to ignore customer requests. smart city innovations in Switzerland.
The aim of this report is to give the many voices,
from investors and bankers to regulators, a voice
and showcase the diversity of the Swiss ecosystem. It
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First Swiss Digital Asset and Wealth Management Report 2021
SWISS DIGITAL ASSET ECOSYSTEM
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CONTENTS
ADDED VALUE IN THE CRYPTO DIGITAL ASSETS: A NEW
VALLEY - BY HEINZ TÄNNLER AND EXCITING INVESTMENT
Added value in the Crypto Valley ———————— 8 UNIVERSE
Digital assets ——————————————— 28
The digital asset investment universe ————— 30
More than 400 crypto funds globally —————— 31
Digital assets venture capital funds —————— 33
KEY FINDINGS Venture capital —————————————— 33
.H4QGLQJV ——————————————— 10
Tipping point for digital asset ———————— 11
Strong Swiss ecosystem ——————————— 11
Larger banks preparing ——————————— 12
Venture capital funding growing ——————— 12
SOPHISTICATED INVESTORS
OREDOFRPSHW
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LRQVW UHQJW KHQLQJ——————— 12 ARRIVED
Switzerland staying at the top ———————— 12
Sophisticated investors arrived ———————— 36
)DPLO\R]FHVFKDUJLQJDKHDG ———————— 37
Private banks and wealth managers appear on the
scene —————————————————— 39
From ‘kill the banks’ to native crypto banks ——— 41
A NEW ASSET CLASS OR THE More banks are preparing behind the scenes —— 42
DIGITAL GOLD The hedge funds are piling in ———————— 43
A new asset class or the digital gold —————— 13
THE TOKENIZATION OF
A RAPIDLY GROWING SWISS EVERYTHING
DIGITAL ASSET ECOSYSTEM The tokenization of everything ———————— 44
Proof of ownership and capital markets ———— 46
A history of innovation in asset management in
:K\4[LW
LILW
LVQRW
EURNHQ" ————————— 47
Switzerland ——————————————— 19
How tokenization can shake capital markets —— 47
Crypto Valley puts Switzerland on the global map 19
A win for growth and for investors —————— 47
The Swiss regulator as enabler for digital assets — 22
Switzerland’s head start and the challenges ahead 48
NFTs and the new creator economy —————— 48
INTERVIEW WITH FORMER
FINMA CEO MARK BRANSON ON DECENTRALIZED FINANCE AS
STABLECOINS, REGULATORY THE NEW FRONTIER IN FINANCE
PRINCIPLES AND INNOVATION 52
HFHQWUDOLHG4QDQFHDVWKHQHZIURQWLHULQ4QDQF
Interview ———————————————— 23
Switzerland as an asset management hub for digital
assets —————————————————— 24
HQG
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6
STABLECOINS OR THE NEW URZLQJLQVW
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Knowhow required ———————————— 65
CENTRAL BANK MONEY The regulators are paying attention —————— 66
Stablecoins or the new central bank money ——— 55 How to value a digital network ———————— 68
Interview with Thomas Moser, President of the Swiss Regulated exchanges wanted ———————— 68
Central Bank ——————————————— 57 A chance to strengthen the Swiss fund ecosystem 71
THE SWISS DISTRIBUTED THE MONEY FOR THE INTERNET
LEDGER TECHNOLOGY ACT IS GROWING FAST
The Swiss Distributed Ledger Technology Act —— 59 Digital platforms of money ————————— 72
New generation of investors ————————— 73
THE ROAD TO A WIDER
ADOPTION THE FUTURE IS HERE
The future is here ————————————— 75
The road to a wider adoption ———————— 61
The decentralization paradox ———————— 77
Banks are warmly welcomed ————————— 62
Switzerland making a mark ————————— 78
Custody solutions on the rise ———————— 64
7
ADDED VALUE IN CRYPTO VALLEY BHT 01 Added value in Crypto Valley 8
First Swiss Digital Asset and Wealth Management Report 2021
he Swiss Blockchain Federation is probably • Networking: The SBF is the central platform for all
T a unique initiative worldwide: launched by
two Federal Councillors, Finance Minister
of those interested in blockchain from business,
industry, politics, administration, and science and
Ueli Maurer and Economics Minister Johann N. R•HUVDQHW ZRUNIRUW KHVHSOD\HUVDW KRPHDQG
6FKQHLG HU$PPDQQLQDQH•RUW REULQJW
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KHU abroad.
Crypto Valley’s driving forces and better understand
their concerns. The former task force has since • Innovation: The SBF promotes innovation
become a private-public partnership that unites by working together with Innosuisse, the
industry, start-ups, science, cantons, and politics. Swiss Agency for innovation promotion, to
generate projects and start-ups in the annual
The Swiss Blockchain Federation (SBF) aims to SERI Innovation Cycle, connecting them with
promote a prosperous, secure, innovative, and companies at an early stage, organizing
world-leading blockchain ecosystem and has hackathons, and driving knowledge and
achieved quite a bit: technology transfer.
• Framework: The SBF represents the interests The three cantons of Ticino, Zurich, and Zug play
and concerns of Crypto Valley vis-à-vis politics a particularly active role in the Swiss Blockchain
and administration and advocates for optimal Federation. The responsible cantonal councils
framework conditions, such as the new, forward- recognized the importance and potential of location
looking DLT legislation. marketing early on, especially when it comes to
start-ups with blockchain-based business models.
Thanks to the joint activities of these cantons with
the Swiss Blockchain Federation, the attractiveness
of Crypto Valley has continuously increased. Those
cantons that have supported their ecosystems with
funding programs are now reaping the rewards. The
settlement of new blockchain companies continues
despite crypto winter and the Corona year.
According to the CV VC Top 50 Report, Crypto Valley
has 960 companies and 5,200 jobs. Investments and
a continued positive, curious attitude are essential
for “Crypto Nation Switzerland” to stand out and
serve as a beacon to the world with its genuine
innovations and ground-breaking business models.
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Federation and Finance Director of the Canton of Zug.
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Added value in Crypto Valley 9
KEY FINDINGS 02 .H4QGLQJV 10
First Swiss Digital Asset and Wealth Management Report 2021
his report is based on more than 80 prices have given a strong impetus to widespread
T interviews with investors, wealth managers,
fund managers, bankers and service
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providers in Switzerland. It highlights the incredible lack of regulation, illicit behaviour and the risk of
depth and breadth of the Swiss digital asset a heavy-handed regulator. Regulators in Europe
industry that has sprung out of Crypto Valley. It is a and the US have recently started to look more
testament to the rapid development of digital assets closely into the various crypto and digital asset
and blockchain-technology at large, becoming more R•HULQJV–W LVFOHDUW KDW KHHQW
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diverse and also more institutional. Switzerland can moving to a more regulated future, even though
be really proud to be a key part of this far-reaching this will take time and solid knowledge from the
technological development, boosting a strong, well- regulator’s side. The Swiss regulator FINMA has
educated and ever-growing ecosystem. been at the forefront of this development, giving
Switzerland a clear head-start. Switzerland has a
Tipping point for digital asset diverse and rapidly maturing ecosystem with many
An investor note penned by Morgan Stanley’s wealth wealth managers, asset and fund managers and
management unit in March 2021 summarized the SULYDW HEDQNVH[SDQG LQJWKHLUR•HULQJV–Q$SULO
rise of digital assets and cryptocurrencies neatly: 2021, for example, the large Swiss insurer AXA
“Our recommendation is that investors get educated announced that it would start to accept bitcoin for
and consider how and whether to get exposure SD\PHQW V–Q0D\* HQHYDEDVHG 7DXUXVJRW
to this burgeoning asset class in their portfolio.”1 KHUHJXODW
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Investors entered the digital asset and crypto space regulated marketplace for digital assets. This is an
at a rapid pace in 2021 as cryptocurrencies and important step as a regulated digital asset exchange
digital assets moved in early 2021 from something for larger volumes is sorely missing in Switzerland.
easily dismissed as hype (or worse) to a nascent Clearly, digital assets are making huge strides
and exciting new asset class. Digital assets are towards wider adoption in Switzerland. This can
clearly here to stay, as large Swiss and US banks are be seen in the digital asset ecosystem map in this
ZRUNLQJEHKLQG KHVFHQHVRQDG
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DODVVHW R•HULQJ report. At the same time, an increasing number
and traditional hedge-funds start building exposure. RIUHSXW DEOHIDPLO\R]FHVZHDOW KPDQDJHUVDQG
0DQ\VHUYLFHSURYLG HUVFRQ4UPHG KDW
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tipping point for the acceptance of crypto currencies )DPLO\R]FHVLQSDUW LFXODUZHUHHDUO\DG RSW
HUVRI
and digital assets: The client demand had become this new asset class. Many private banks also saw an
too large to simply brush aside. Even the mosre uptick of digital assets by a younger audience, often
discerning and critical Financial Times came to the serving as the next generation of existing clients.
conclusion in May 2021 that bitcoin and crypto are The banks are using digital assets services to reach
here to stay.2 Bitcoin and its brethren entered the out to the next generation of bank customers. In
Zeitgeist in 2021. summary, Switzerland is well positioned due to its
competence in wealth management, experienced
Strong Swiss ecosystem regulator, modern regulatory framework, a solid tax
7KHFRPELQDW LRQRIW HFKQRORJ\DQG 4QDQFHLQ framework and the Crypto Valley ecosystem.
the form of digital assets has super-charged
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11First Swiss Digital Asset and Wealth Management Report 2021
L Associates. Switzerland has a hard time competing
The large Swiss banks, important global custodians ZLW
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IRU4QDQFLDODVVHW VDUHVWLOOPRVW O\DEVHQW LQHDUO\ However, what the US is lacking are clear regulatory
2021. Their approach seems to be to “wait-and- and taxation guidelines, which create uncertainty for
see.” This was due to regulatory concerns as well any incumbents or new players in the digital asset
as the lack of knowledge and, in turn, commitment. ecosystem. In Europe, while the UK seems to be
Interestingly, the smaller private and cantonal banks, UDJJLQJLW
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who are closer to their private clients, are making two new electronic securities and digital assets acts.
KHDG ZD\UROOLQJRXW YDULRXVG LJLW
DODVVHW R•HULQJV Further, the EU is working on a Markets-in-Crypto-
0DQ\SURYLG HUVRIG LJLW
DODVVHW VHUYLFHVFRQ4UPHG Assets (MiCA) framework, determined to catch up
that large institutions are preparing for a digital with Switzerland.
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train left the station! Switzerland staying at the top
The recent EU Blockchain Ecosystem Development
Venture capital funding growing Report states: “Switzerland is one of the most
Switzerland has a rich seed and angel investor advanced nations when it comes to blockchain and
community that funds many amazing startups. crypto-assets, not only in Europe, but also globally.
However, in order to reach global scale and scale It has been called the ‘crypto nation’ and is home to
fast, a large pool of later stage capital, termed the world-famous ‘crypto valley’ of the Zug canton.”3
scaling capital, is required. As tech entrepreneur $FFRUG LQJWR1LNODXV1HG HUPDQQ&KLHI*
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and investor Francisco Fernandez pointed out, large 2]FHURIW KH)L&$6$* LQ=XJ6ZLW ]HUODQGLVWKH
pools of growth capital for scale-ups are missing best hub for digital assets globally. Supported by
in Switzerland. This is clearly a disadvantage in regulatory stability, optimal business conditions
comparison to the buoyant and highly active US expertise, and know-how resources, Switzerland
venture capital sector that provides funding to remains the prime crypto nation.” In order to retain
the likes of Coinbase with its unicorn valuation. its lead, Switzerland clearly needs rapid further
Nevertheless, the ecosystem is picking up speed with adoption of this new asset class by large banks
CV VC’s successful CHF 13m fundraise in May 2021. DQG KHRYHUDOO4QDQFLDOVHFW
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lobal competition strengthening center. Switzerland has all the necessary building
Switzerland is in strong competition with other blocks in place: a forward-looking regulator, an
4QDQFLDOKXEVVXFKDV1HZ< RUN/RQG RQDQG innovative legal framework and clarity around
Singapore. As a fund domicile Switzerland is small in D[DW
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comparison to Luxembourg, Ireland, the UK, the US IRFXVDQG HG
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or Singapore. The lack of scale is clearly a stumbling sector. The emergence of digital assets as a
block. A trade show of US digital asset managers nascent and highly innovative asset class is a huge
DQGYHQW XUHFDSLW DO4UPVLQ0DUFKVKRZHG opportunity for Switzerland. It would be a shame if
that the US has a strong homegrown digital asset Switzerland lost its head start to others!
investment industry that is expanding globally. The
US can leverage its strong venture capital ecosystem,
their crypto exchanges from Kraken to Coinbase
and the investment strengths of hedge-funds
with the likes of Skybridge Capital or Bridgewater
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12A NEW ASSET CLASS OR THE DIGITAL GOLD 03 A new asset class or the digital gold 13
First Swiss Digital Asset and Wealth Management Report 2021
itcoin was among the best performing
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of respected investors, digital assets
experienced a fear of missing out (FOMO) moment
in late 2020 that continued unabated into 2021.
2020
More and more investors realized that the risk of
missing out is larger than the comfort of abstaining. In late 2020 and early 2021, a big sentiment change
Elon Musk, the world’s wealthiest man, had a unique occurred among sophisticated investors towards
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FRLQW RKLV cryptocurrencies and digital assets. Many of them
7ZLW HUELRLQKLVSUR4OHOHDG
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jump in the price, before announcing in February are here to stay. FOMO set in with many prominent
2021 that Tesla had bought $1.5 billion worth of investors allocating money to digital assets. This
bitcoin. In May 2021 Tesla sold the position at a hefty ULJJHUHG
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SUR4W RIPLOOLRQ7HVODDOVRVDLG LWZLOOVW DUW cryptocurrencies are, exactly: are they a currency or
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products “subject to applicable laws and initially on LQW HUQHW DJH"–QDVKRUW YLGHRLQHDUO\6ZLVV
a limited basis” before retracting in May 2021. It is bank UBS Chief Economist Paul Donovan expressed
dazzling to see how one individual has the power to his view that bitcoin and other cryptocurrencies are
move the prices of markets with singular statements not actual currencies. The reason being that they are
about cryptocurrencies or messaging apps. In 2021, too volatile as a store of value due the absence of a
Musk became the single most important factor in central bank balancing supply and demand.1 So, if
crypto markets. QRW DFXUUHQF\ZKDW LVLW"
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controlled by central banks and accepted as legal
TESLA’S BITCOIN SPECULATION tender, cryptocurrencies or digital assets are not
HELPED TO BOOST PROFITS centrally managed by governments.2 They are
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A new asset class or the digital gold 14First Swiss Digital Asset and Wealth Management Report 2021
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of marketing at the New York University Stern School new type of money via a system that is programmed
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our trust on central governments that keep printing years and is rapidly gaining in popularity as both a
money and it is an interesting way of transporting type of money and storehold of wealth is an amazing
money. Try to transport ten million dollars of gold accomplishment. There aren’t many alternative
through London! ” He also stressed the scarcity of gold-like assets at this time of rising need for them.”6
supply and the view that many investors see it as Nowadays, cryptocurrencies such as bitcoin are
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started to regard bitcoin and its brethren as a new 4QDQFLDOV\VW HP
asset class with a limited supply, akin to gold.
Michael Saylor, CEO of MicroStrategy and early SG
bitcoin adopter for treasury, publicly stated that for
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’
cash is not an asset but a liability. For Saylor, bitcoin
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is “the most global asset as it is constantly traded
around the world.”5
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A new asset class or the digital gold 15First Swiss Digital Asset and Wealth Management Report 2021
BITCOIN IS GOLD 2.0
BITCOIN GOLD
S Fixed inelastic supply Limited elastic supply
Transferable Like sending an email Like sending a ton of bricks
Storable Low cost High cost
Decentralized Yes <
HVEXWFDQEHFRQ4VFDW HGE\DVLQJOH
authority in every jurisdiction
Durable Yes – Digital Asset Yes – Physical Asset
Fungible Yes Yes
9HUL4DEOH Yes Susceptible to counterfeiting
Divisible Easily divisible (1 Bitcoin is divisible into Not easily divisible (troy ounce unit of
1000 million units called satoshis measurement)
6NULGJHLWFRLQ)XQG3SUHVHQWDWLRQ
Skybridge Capital, a US fund of funds, launched More traditional investors still prefer the physicality
a new bitcoin fund in January 2021. The fund, led of gold, as it can be used for jewelry and industrial
by prominent investor Anthony Scaramucci, sees applications. However, digital assets are global and
bitcoin having strong advantages versus gold as HFHQW
G UDOL]HG DQGFDQH•RUWOHVVO\PRYHDFURVV
outlined in his investor presentation: boundaries, which gold cannot.
In several interviews, Swiss product providers have Michael Saylor of MicroStrategy put it nicely: “bitcoin
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DO is destroying gold’s value proposition” because
gold” resonates strongly with investors. Investors bitcoin has “dematerialised gold.”7
with a strong belief in monetary devaluation and
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venturing into digital assets, as Roland Friedli from
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active in the space since 2016.
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A new asset class or the digital gold 16First Swiss Digital Asset and Wealth Management Report 2021
COINBASE FINANCIAL RESULTS Peak bitcoin market
capitalization was above $1
Coinbase
revenue in 2019
trillion in spring 2021.
$534m
$1.3bn
The 14th of April 2021 saw a pivotal moment for
Coinbase
cryptocurrencies with the Nasdaq listing of the
revenue in 2020
leading US crypto exchange Coinbase. It immediately
became one of the 120 most valuable public
companies in the US. The Financial Times marked
this monumental event for the acceptance of
Coinbase losses
in 2019
-$30m cryptocurrencies with a big headline on its frontpage
saying: “Coinbase’s $76bn debut puts seal on
cryptocurrencies asset class.”8
&RLQEDVHSUR4W
in 2020
V
+$322m
)LQDQFLDO7LPHV
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asset class, 15.04.2021
A new asset class or the digital gold 17A RAPIDLY GROWING SWISS DIGITAL ASSET ECOSYSTEM 04 A rapidly growing Swiss digital asset ecosystem 18
First Swiss Digital Asset and Wealth Management Report 2021
A HISTORY OF INNOVATION IN ASSET dollars in size and trading volumes are relatively
MANAGEMENT IN SWITZERLAND VPDOOLQFRPSDULVRQW RW
UDG LW
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There is just not enough liquidity for larger funds
QWKHVDQGVWKH4QDQFLDOLQGXVWU yet, according to Jaeger. He sees this new asset class
I was a fun, innovative and sometimes crazy
place to work. It attracted a lot of talent and
as by far not yet matured, with too many “cowboys’’
lacking maturity or even seriousness in the market.
was highly lucrative (it largely still is). This was also
the time when a new fund type with unrestricted However, this is changing fast.
investment strategies arrived on the scene: the
swash-buckling hedge-fund. It was the time when
OHJHQG DU\LQYHVW RUVVXFKDV* HRUJH6RURV3DXO
Tudor Jones or Bruce Kovner made spectacular
TOP INITIAL COIN OFFERINGS
returns year-on-year. According to Erwin Brunner,
ZKRIRXQG HGRQHRIWKH4UVW IXQG
RIIXQG VLQ
4.1 BLOCK.ONEEOS June 2018
Switzerland, these new funds easily generated an
DQQXDOL]HG UHW XUQRISHUFHQW 7KH\ZHUH4UVW
$320m DRAG
ON COIN March 2018
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W ]HUODQG E\VHFUHW LYH* HQHYDQ
private banks such as Banque Privée Edmond de
$300m HUBOI February 2018
Rothschild. In the new millenia, these funds had
their hay-days with spectacular performances even $258m HDAC December 2017
during market crashes. The legend of the brash,
combative and wealthy hedge-fund manager was $257m FILECOIN September 2017
born. It was this time that Switzerland became an
alternative asset management center with groups $157.9m SIRIN LABS December 2017
VXFKDV3DUW QHUV* URXS50)+DUFRXUW 5HLFKPXW K
/*
7%UXQQHU–QYHVW DQG PDQ\PRUH $152m BANCOR December 2017
Lars Jaeger, an alternative investment industry $152m THE DAO May 2017
pioneer and regular book author on science and
technology, has been involved in various alternative $150.9m BANKERA February 2018
investment strategies since 1997 in Switzerland.
–QKHVW DUWHGKH4UVW
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$142.4m POLKADOT October 2017
that exploited “alternative betas” (a term he
)LQDQFLDO7LPHV5HVHDUFK
coined) akin to hedge-funds. He saw how the Swiss
alternative industry with strong players such as
RMF, Harcourt or EIM had developed rapidly over The Crypto Valley puts Switzerland
KH\HDUV+RZHYHUW
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the following regulatory tsunami led to a brutal 7KH4QDQFLDOFULVLVRIJDYHELUW KW
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consolidation in Switzerland. Today, industry QHZDVVHW FODVVELW FRLQ:KDWVW
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observers compare the nascent digital asset industry a strongly libertarian cypherpunk community, would
to the birth of the hedge-fund industry in the HYHQW XDOO\4QG LW
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nineties. High returns were and are possible due to emergence of Crypto Valley in Zug in 2013, digital
LQWUDQVSDUHQW DQGLQH]FLHQW PDUNHW V+RZHYHU/DUV assets took root in Switzerland. In short succession,
-DHJHUW KLQNVW KHUHDUHQRW DEOHG L•HUHQFHVDVW KH fueled major events from the establishment of
market for cryptocurrencies is only about two trillion several blockchain protocols such as Ethereum in
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A rapidly growing Swiss digital asset ecosystem 19First Swiss Digital Asset and Wealth Management Report 2021
JXLGHOLQHVED4QDQFLDOUHJXODWRULQDQG the ICO craze of 2016 and 2017. In 2018, the market
WKHOLFHQVLQJRIWKH4UVWQDVFHQWFUSWREDQNVLQ ZHQW LQWRDWDLOVSLQIROORZLQJW KH4UVW UHJXODW RU\
2019, Switzerland developed a strong ecosystem actions and a “crypto winter” set in. Then, in 2019,
IRUGLJLW
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incorporated a company in Switzerland in 2019 KHEHJLQQLQJRIW
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because of its crypto-friendly ecosystem was Ali entering the space. Nowadays, the third phase is
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to Mizani, his search for legal certainty and a crypto- ZLWK4QDQFH
friendly environment eventually led him to Zug,
Switzerland. Here he found not only one of the From 2013 until 2018 a nascent ecosystem was
most open-minded regulators, but also one of the established, followed in 2019 by a new phase with
most advanced infrastructures with one of the most the institutionalization and professionalization of
HQJDJLQJDQG FDULQJFRPPXQLW LHV$QW RQ*ROXE VHUYLFHVDQG R•HULQJVLQ6ZLW ]HUODQG 6ZLVVSULYDW H
of Flovtec, who has been part of the Swiss crypto banks such as Julius Bär or Maerki Baumann and
and blockchain ecosystem for many years, sees the online bank Swissquote started to provide custody
FRPPXQLW HYHORSLQJLQSKDVHV7KH4UVW
\G SKDVH and trading services to its investors. Today ,an
VDZSURJUDPPHUVHQW HULQJW KH4QDQFHVSDFHERW K interesting fusion of the old-and-stayed world of
innocently and, sometimes, malevolently. This led to banking and the fast-moving, experimentative
CV VC: THE HISTORY OF THE CRYPTO VALLEY, 2021
COMPANIES
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A rapidly growing Swiss digital asset ecosystem 20First Swiss Digital Asset and Wealth Management Report 2021
world of programming and coding is taking place.
In addition, Switzerland is one of the leading private
In a survey in 2020 by
banking hubs in the world, with a wide range of Swiss bank UBS, the top
investors from private bank clients and wealthy
individuals and families to wealth managers. It is
question asked by clients
perceived as a safe haven for wealth with a steadily was how much they should
increasing number of sophisticated single- and
PXOW LIDPLO\R]FHVWKDWLQYHVW DFURVVW KHHQW LUH
allocate to bitcoin.
investment spectrum. All of this has created a strong
ecosystem in Switzerland that is “hard to build from
scratch,” as an experienced early Swedish investor
into cryptocurrencies stated. Switzerland has a clear
edge in digital assets.
Vitalik Buterin is a
Russian-Canadian
programmer and writer
who is best known as
one of the co-founders of
Ethereum that was setup
in Switzerland. Photo by
Steve Jennings/G etty
Images for TechCrunch,
September 18, 2017
A rapidly growing Swiss digital asset ecosystem 21First Swiss Digital Asset and Wealth Management Report 2021
TS nascent blockchain technology and digital assets,
FINMA gave clarity and acknowledgement while
In dozens of interviews with ecosystem participants the rest of the world was still wondering how to
it was obvious that the Swiss regulator FINMA deal with this highly innovative and exciting industry.
acted as a strong catalyst for the entire ecosystem, Many industry players that were interviewed for
providing regulatory certainty for a nascent industry. this report acknowledged that the regulatory clarity
and the positive attention of the regulator led to a
FINMA, which has been operating a dedicated faster development of the ecosystem in Switzerland.
4QW HFKGHVNVLQFHVKRW RZRUOG
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HIDPHLQ Jeroen von Oerle of Lombard Odier Darier Hentsch
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A rapidly growing Swiss digital asset ecosystem 22
.. .INTERVIEW WITH FORMER FINMA CEO MARK BRANSON 05 Interview with former FINMA CEO Mark Branson 23
First Swiss Digital Asset and Wealth Management Report 2021
I n an exclusive interview, Mark Branson,
then CEO of FINMA, gave some interesting
insights from a regulatory perspective.
INTERVIEW WITH MARK BRANSON
In Branson’s view, crossborder payment more competition and hopefully new jobs for
systems are “ripe for innovation” as fees tend KH4QDQFLDOLQG
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to be high and highly intransparent. Cross- are under pressure in Switzerland and around
border payment is a slow and cumbersome the world. It also needs an acceptance that
process in a world where customers are used “projects can fail, as long as they fail safely.”
to instant services. Therefore, new payment For wider adoption and scaling of blockchain
projects are welcomed as long as they satisfy technology, he would like to see a trail-blazing
three criteria: security, compliance and client SURMHFW KDW
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same utility as traditional currencies. On the to scale. Only if the
other hand, blockchain technologies promise blockchain technology
streamlined processes. As a regulator, one has ecosystem generates
to be technology-neutral. A simple regulatory new jobs, will it be a
principle for him is “same risks, same rules”. true success from an
Branson’s view is that current rules, such economic point
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a strong ecosystem, tailored legislation and a
A competent regulator, Switzerland has a perfect
setup to become a leading hub for digital asset
MB wealth and digital asset management. Henri
, Arslanian, PwC Crypto Leader based in Hong Kong,
publishes a global crypto hedge fund report every
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is very well positioned globally due to its brand and
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Interview with former FINMA CEO Mark Branson 24First Swiss Digital Asset and Wealth Management Report 2021
DIGITAL WEALTH & ASSET GENDER GAP IN THE
MANAGEMENT HUBS SWISS BLOCKCHAIN
ECOSYSTEM – WHERE
Top Crypto Hedge Fund Domiciles ARE WE HEADING?
42 CI
38 US Cryptocurrencies and blockchain-
based technologies had a steep rise in
8 BVI
recent years and are disrupting various
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industries around the world. However,
less than 10% of active collaborators
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about 6% of funding in related ventures
5 L, N, S, I M A
is received by female founders, while a
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develop the ecosystem should not be
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manager locations, right after the US, the UK and more arises as to why there are so
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top wealth management destinations with a strong blockchain space. One of the more
4QDQFLDOV\VW HPDQG JOREDOEUDQG $OOW KHVHIDFW RUV obvious reasons is the gender disparity
make Switzerland destined to become a wealth and LQWKHWZRXQGHUO\LQJDUHDV4QDQFHDQG
asset management hub for digital assets. HFKQRORJ\:RPHQDURXQG
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have been more likely to lack access to
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women were not allowed to open a
bank account without their husbands’
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Interview with former FINMA CEO Mark Branson 25First Swiss Digital Asset and Wealth Management Report 2021
attractive employer by female students due to investing, women tend to focus on less risky
the lack of integrity, the focus on competition assets. Secondly, when approaching a new
rather than team collaboration and the not so area, women are more concerned with gaining
family-friendly conditions.2 enough knowledge and expertise before
getting actively involved.
Similar downsides apply to the tech industry.
Several studies reported the lack of family- Opportunity set for women
friendly conditions as being a reason for fewer is expanding
women in tech. A more recent study by the To conclude, the already existing systemic
University of Bern highlights the impact of EDUULHUVIRUZRPHQW RHQW HUW KH4QDQFH
self-evaluation on choosing a career in STEM and tech area holds true for the blockchain
4HOG V 3 Many young women assess their own ecosystem and hinders women getting
mathematical competencies worse than men. involved and advancing in this area. However,
Thus, young women refrain from approaching on a positive note, more and more women are
a career in a STEM area. interested to learn more about blockchain and
FU\SW
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Additionally, the risk and blockchain or cryptocurrencies focused
aversion that has been communities and meetups, these women are
observed in women getting more opportunities to get involved
ZDVLG HQWL4HGDVRQH and not only gain knowledge and expertise
of the key challenges EXWDOVR4QG DVXSSRUW LQJQHW ZRUNW RH[SORUH
for women entering the opportunities within this rather new
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Interview with former FINMA CEO Mark Branson 26First Swiss Digital Asset and Wealth Management Report 2021
RF
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FINMA CEO Mark Branson 27
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6(DQN.ROLQSODW.23077XJ7.OOULJKWVUHVHUYHG SEBA, B N EDIGITAL ASSETS: A NEW AND EXCITING INVESTMENT UNIVERSE 06 Digital assets: a new and exciting investment universe 28
First Swiss Digital Asset and Wealth Management Report 2021
igital assets are a new alternative asset Due to lower costs and easier transferability,
D class based on decentralized blockchain-
technology. Some investors see it as an
industry participants such as Jeroen von Oerle of
Lombard Odier Darier Hentsch believe that the
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KHUVVHHLW DVWKH technology will enable fractional ownership of
emergence of a new platform-based internet-native various assets, from real estate to art and cars.
money that is the foundation for an entirely new
4QDQFLDOLQIUDVW UXFWXUH An interesting aspect of blockchain-based digital
assets are that every trade is logged decentrally,
visible for everyone. According to Tavis Digital,
M tokens serve as digital representations of any given
G B, underlying asset, allowing for fractionalization
and thus higher accessibility, improved liquidity
CEO SEBA B, and execution speed in combination with a never
before seen transparency and trust. In addition,
cryptocurrencies and digital assets trade 24/7, and
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THE POTENTIAL FOR DIGITAL ASSETS IN PRIVATE MARKETS IS MUCH GREATER
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Digital assets: a new and exciting investment universe 29First Swiss Digital Asset and Wealth Management Report 2021
THE DIGITAL ASSET INVESTMENT sophisticated managers, highlighting that traditional
UNIVERSE banks clearly have a role to play in digital assets,
despite the peer-to-peer nature of decentralized
For sophisticated investors who invest their own assets.
or their client’s money, a small allocation to bitcoin
RIVHHPVW REHW KHQDW XUDO4UVW VW
HSW RJHW 2. Active trading strategies
familiar with this new asset class. However, digital Investors can access a wide array of trading
assets provide a wider investment spectrum that strategies managed by professional managers.
can be divided into four categories. These basic four OREDOHVW
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categories are a good starting point for an investor invest into digital assets. These replicate strategies
embarking on a digital asset investment journey. from the hedge-fund industry, ranging from long-
short to market-neutral and high-yield strategies.
1. Coins 3URIHVVLRQDOPDQDJHUVDOVRR•HUYDULRXVPDQDJHG
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capitalization is bitcoin, followed by ethereum. R•VKRUHIXQG V7UDG LQJVW
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also the reason why most professional investment well as investment and tax reportings.
vehicles focus on the top 50 coins in existence.
Investors can get exposure through a plethora
of venues from opening their own crypto wallets
to store crypto and opening trading accounts „””•–
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of crypto and digital assets is still a main concern
for many investors. Therefore, choosing the right
approach is a crucial part of the journey. Investors
have to carefully assess how much direct control,
ease of use and information about taxation they •
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custody is clearly one of the biggest concerns of 30
…
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‡First Swiss Digital Asset and Wealth Management Report 2021
turn, liquidity. In addition, there are many legal and
DIGITAL ASSET INVESTMENT regulatory uncertainties that need to be addressed.
STRATEGIES
MORE THAN 400 CRYPTO FUNDS
GLOBALLY
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S
Scott Army of the American research provider Vision
M
Hill globally tracks more than 400 crypto hedge-
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funds. He sees a clear institutionalization of the
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traditional hedge-fund industry. Speaking to industry
experts and fund managers, the nascent market for
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digital assets is often compared to the early days of
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many retail traders trading on sentiment, arbitrage
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opportunities between exchanges and strong
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market full of alternative risk premia. Joachim
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Nahmani of Lemvi calls digital assets a “generational
trade” due to the unique opportunity set that does
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Market
3. V
Besides investing into coins, there is an increasing LAUNCH OF NEW CRYPTO
number of venture capital providers that invest in HEDGE FUNDS CORRELATES TO
new digital asset startups and projects. In recent THE PRICE OF BITCOIN
months, the interest in the Decentralized Finance
(DeFi) industry has strongly increased. The US
20,000 45
venture capital industry in particular has been
heavily investing and creating outlandish returns, 40
with Andreessen Horowitz as one of the largest 15,000
35
players. Investors can choose between traditional 30
3/3VW
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tokenized funds. These investments typically have 10,000
20
a longer investment horizon and require larger
15
minimum investments. 5,000
10
4. Tokenized assets 5
Still in its infancy are tokenized private assets such 0 0
20
20
20
20
20
as real estate, collectibles such as cars, music, art or
20
20
20
20
13
14
15
16
17
20
12
18
19
1Q
shares of smaller companies. Tokenized assets are BTC F
still very niche and lack trading on exchanges and, in
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Digital assets: a new and exciting investment universe 31First Swiss Digital Asset and Wealth Management Report 2021
Bernegger sees more traditional fund managers and
INVESTORS IN CRYPTO HEDGE FUNDS even fund-of-funds entering the digital asset space.
They add robust institutional investment processes
M and more thorough due diligence. Henri Arslanian of
PwC sees this already happening in the crypto fund
50
space, where best practices from the traditional fund
40
industry with independent custodians and directors
30
are being adopted by crypto funds. These are
20
welcome signs of a rapidly professionalizing sector
10
catering to more institutional and sophisticated
0
FO H-- F&
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V F investors.
The crypto fund industry is developing quickly
N
according to a recent PwC report that states:
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DO$X0DVVHW VXQGHU
A M management) of crypto hedge funds globally
increased to over US$2 billion in 2019 from US$1
N I 58.5 27.5 billion the previous year.”1 Further, the report states
that “the average AuM increased from US$21.9
Average ticket size (US$m) 3.1 0.3 million to US$44 million.” The report also clearly
shows that investors still allocate very small tickets
to funds, with a median ticket size clocking in at only
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&USWRHGJH)XQG5HSRUW
Setting up a regulated
and institutional-
grade asset manager
in Switzerland requires
in-depth knowledge
of processes and a
clear setup based on
experience, as Zurich-
based Tavis Digital
conrmed. In a nascent
industry, sta with
experience is in short
supply.
D3Z&(OZRRGQQXDO&USWRHGJH)XQG5HSRUW 32You can also read
