Swiss crypto industry unfazed by New Year bitcoin crash

The New Year has started with a sharp fall in the price of bitcoin – and some intriguing stories surrounding the Swiss cryptocurrency scene.

This content was published on January 10, 2022 – 08:00

swissinfo.ch

The industry is well used to volatility in the price of cryptocurrencies and is ploughing on with expansion plans regardless of how many dollars you can currently get for your bitcoin.

New heads at Switzerland’s oldest crypto firm

As management shake-ups go, Bitcoin Suisse has raised the bar to a new level. The crypto company’s chairman (and founder) and its CEO have both decided to quit their posts in the space of three weeks.

Chief Executive Arthur Vayloyan has just announced he will hand over the reins to former Barclays and UBS bank executive Dirk Klee in April. Flamboyant founder Niklas Nikolajsen has only just stepped down from his duties of chairing the board. Both will stay on at the company as board representatives but have taken a step back from day-to-day affairs.

The departure of the two most senior managers at Bitcoin Suisse comes on top of a recent executive reshuffle that saw new personnel hired to head the company’s legal and compliance departments.

You don’t have to look very far to find a likely reason for the changes. In March, Bitcoin Suisse was denied a banking licenseExternal link when the financial regulator found deficiencies in its anti-money laundering compliance systems.

Finma’s unusually severe public rebuke tore a hole in Bitcoin Suisse’s strategic plans and dented its reputation as a bridge between traditional finance and cryptocurrencies.

Despite starting up Bitcoin Suisse in 2013, Nikolajsen’s decision to step back is perhaps the least surprising.

I recently wrote about Switzerland’s intention to gentrify the wild world of cryptocurrenciesExternal link. Nikolajsen’s anti-establishment tendencies, combined with a passion for collecting vintage wartime tanks, are not a natural fit for making decentralised finance more palatable to lawmakers and regulators.

Vayloyan’s decision to step back as CEO after just four years at the helm was more of an eye-opener – particularly the timing, straight after the company appointed a new boardroom head.

It’s unclear whether Bitcoin Suisse, one of Switzerland’s oldest and most successful crypto companies, will re-apply for a banking license or even partner with an existing bank.

Appointing an experienced banker (Klee), with strong leaning towards wealth management, as a new CEO suggests that the company is betting on more rich clients showing an interest in crypto. It also points to a new strategic thrust towards expanding Bitcoin Suisse’s operations outside of Switzerland.

Mining for digital gold

I wrote some time ago about failed efforts to set up cryptocurrency mining operationsExternal link in Switzerland. Mining is the computational method of creating the likes of bitcoin out of thin air. The highly competitive market requires a lot of concentrated computing power these days.

It’s curious that Swiss cybersecurity firm WISeKey plans to invest $10 million to set up bitcoin mining operations in Switzerland over the next two years. It’s also difficult to see how they can succeed where others have previously failed.

Switzerland has abundant hydro-electric power, but it comes at a high price compared to many other countries. This is why the Alpine Mining project had to abandon efforts to mine cryptocurrencies on the Swiss-Italian border, despite negotiating favourable electricity rates with the local authority.

WISeKey points out that the crypto mining industry has been forced through some changes after China, which had been one of the dominant regions for creating bitcoin, suddenly banned the practice. This has now concentrated crypto mining in the United States. Another notable mining country, Kazakhstan, is currently going through a violent social upheaval which may have an impact on its bitcoin output.

So perhaps WISeKey has spotted a gap in the market. The canton Geneva-based company says it also hopes to open crypto mines in the US and Gibraltar.

The move appears to be a ploy to boost the company’s expanding cybersecurity reach into cryptocurrencies. It offers services that protect databases against “cyber jacking”, when malicious actors plant cuckoo malware that illicitly syphons off electricity to make bitcoin for the criminals.

IPO update

In October, I broke the news that Swiss crypto company Smart Valor plans to list on a European stock exchange. That plan has taken a step closer to becoming reality after Swedish-based Nasdaq First North Growth Market recently granted conditional approval for an initial public offering. A launch date (quite likely for this year) has yet to be announced.

Smart Valor currently offers cryptocurrency trading out of Liechtenstein, but it may also be eying up a DLT (Distributed Ledger Technology) Exchange license in Switzerland. This license category was introduced in August as part of a wider package of legal reforms to encompass blockchain trading. A DLT exchange would be able to trade cryptocurrencies and a new breed of blockchain-compliant digital securities.

This might be of interest to other international players. The Seychelles-incorporated BitMEX exchange, which has had its fair share of regulatory problems, is in the process of setting up a Swiss brokerage unit. Could this be the springboard for establishing legitimate crypto trading operations in the Alpine state?

The rumour mill has it that other crypto exchanges may also be moving to Switzerland. I hope to have more information on this in the near future.

I’ll be reporting from the Crypto Finance Conference in St Moritz between January 12-14. I’m already hearing about some big funding stories, so stay tuned to my Twitter feed @matthewallen40External link to hear the news.