The Crypto Valley Association, established in early 2017, is a non-profit organization that brings together companies, investors, universities and government agencies. It develops and regulates the sector of blockchain technologies. The Association is rapidly developing in the canton of Zug and intends to expand across Switzerland, and it is also interesting for players outside Switzerland. Vasily Suvorov, Luxoft’s CTO, as well as member of the Board and VP of the Crypto Valley Association, speaks about the development of the Association, the cooperation between government and business, as well as ICOs in Switzerland.
– The mission of the Crypto Valley Association is to create the world's best ecosystem for blockchain and crypto-technologies. How do you go about it and what are your near-term goals?
The blockchain is a concept that combines a lot of different variations of distributed ledger technologies. These solutions imply connections – between people, companies or countries. For us, creating a blockchain ecosystem means getting all the key market players around the notion of distributed ledger technologies. The general belief is that blockchain is only about crypto-currencies, but we have a different point of view. Blockchain helps solve a lot of crucial issues and identify new ways of using the existing technologies. We are creating an ecosystem of partnership where representatives of the canton, start-ups, academia and business can effectively work together and develop technologies that can be applied in different ways.
– What sort of key players are you seeking to bring together – entrepreneurs, researchers, opinion leaders?
First, entrepreneurs, investors, investment funds, government agencies, academia and lawyers. Among the founders of our Association are some large international companies, for example, Thomson Reuters, PWC, Luxoft and others, Lucerne University of Applied Sciences and Arts – and, of course, the city and the canton of Zug. In Switzerland, cantons compete with one another for businesses and innovations. And, similarly, municipalities within cantons compete for businesses. Zug, for example, which has an advanced blockchain and fintech sector, was the first to accept payments in bitcoins for specific municipal services.
– You say you have investment funds, investors and businessmen in your Association. Is it one of your objectives to align talented developers with businessmen who have investment capital?
Of course, we are trying to align business with investors. Our organization has two working groups, Start-ups Onboarding and Investment Working Group. Start-ups Onboarding helps businessmen understand what is needed to open an office and move to Switzerland. They provide contacts and information. When a business looks for an investor it contacts the Investment Working Group who develop an application intended for a potential investor.
On the other hand, we also help investors locate a start-up that meets all the requirements. Now we are working to put in place a bilateral process for generating these applications.
An important part of what we do is conferences and meetups. For example, we have our Crypto Valley Forum that has handled many blockchain projects. We are looking to expand because, in addition to investments, start-ups are interested in technology and research. So we will be launching technology meetups as well.
– How involved are Swiss universities and technoparks? Do they help with competencies or HR resources?
We see that there is a great interest on the part of Swiss education establishments and technoparks. As I said, Lucerne University of Applied Sciences is one of our founders. With support from the cantonal government, they are planning to establish in Zug Switzerland’s largest IT school. A lot depends on what type of institution it is, too: major federal universities, such as ETH Zurich, focus on fundamental science and research whereas applied schools concentrate on practical knowledge. They try to catch the attention of as many industry representatives as they can and are focused on training applied professionals.
Another important indicator for us is that education establishments are looking forward to doing joint researches. As I said earlier, we are now creating a blockchain lab that will be using Crypto Valley’s facilities.
– Regarding federal government and their interest – what kind of support are they giving you today and what are your expectations for the future?
Here we should underscore the contributions of the Swiss government and controlling agencies. Working in a competitive environment, the government generates many initiatives to support our industry. Authorities seek to establish a dialogue with businesses, researchers and public organizations at all levels. We are engaged in consultations at the federal and cantonal levels, and we are in close interaction with FINMA, the regulator. It is important for us to have government involved, and they listen to what market players have to say.
Switzerland as a location for fintech and blockchain business
– On a more general level, how do Swiss laws facilitate the development of fintech and blockchain technologies? Can we say that Swiss laws are liberal, and if so, in what respect are they?
In general terms, Swiss law in the field of fintech and blockchain is similar to European laws. On the federal level, there is the Financial Market Operations Supervision Authority (FINMA) as the regulator. The federal framework is a positive force in shaping the business environment. Cantons working with businesses try to pursue a proactive policy to reach new entrepreneurs, establish industries and create new jobs.
When setting the Crypto Valley Association, we were amazed to see interest from high-level federal officials. We have recently been visited by Schneider-Ammann who is head of the Federal Department of Economic Affairs, Education and Research. Another example is the ETH Zurich which wants to be involved in the Crypto Valley Labs incubator. The goal is to grow new companies that will be using blockchain, distributed ledger technologies and crypto-technologies. It all shows that, among other things, cantonal authorities help us establish relations with a broad variety of stockholders.
– Switzerland has long been known for the way it safeguards banking data and financial services. Has this contributed to the establishment of the new fintech culture in Switzerland? Can you feel its impact?
The Swiss banking system rests on two important pillars: confidentiality and servicing quality. Now there is an undergoing transformation towards greater openness and transparency. And this is changing the banking landscape across the country.
Talking about quality of service, everything here is based on the highest standards of excellence, security, reliability and customer treatment. Fintech start-ups have to follow these traditions likewise.
– Is there in place a procedure for technology patenting and certification of blockchain and its intellectual property?
There is clearly a great potential for working with intellectual property in the blockchain. But this topic has not been fully developed yet. Patents for blockchain technologies are not registered so often in Europe as, for example, in the US where companies are actively patenting blockchain based solutions.
– Some people believe that moving to Switzerland makes sense for tech companies precisely because of stability in legislation and economy. Is that true?
Stability is clearly an important criterion. But no less important is the amazing ecosystem that is associated with innovation and research. A favorable environment opens massive opportunities for developing your business. You can establish partnerships with innovative companies from multiple sectors – or do research with Swiss universities. It is a vibrant place, with a lot of new technologies and products in development. And this is very good for business.
– Let's turn to Luxoft now. What expertise have you accumulated in blockchain and why did you decide to open an office in Switzerland?
Luxoft was founded in Moscow as a spin-off from IBS Group, and we have been on the market for 17 years now. We develop custom-tailored software for major banks, financial trading systems and companies operating on the capital markets. The fastest growing sector for us today is automotive, and we are actively growing in healthcare as well.
We started looking at blockchain about two years ago. To a big extent, we do enterprise blockchain, meaning systems that can be used directly by business in sectors like medicine, banking, logistics, insurance and energy. We reserve some of these solutions for internal work on other projects, and we launch some of them on the market.
About four years ago we moved our headquarters from Moscow to Switzerland, and this decision was driven by Switzerland’s geographical location and business reputation. We got listed on the New York Stock Exchange, so we needed a location that would be sustainable and convenient for customers and investors.
Launching a business and an ICO in Switzerland
– Switzerland is one of the most proactive jurisdictions for ICOs. How is it going today? How does an ICO look like in Switzerland? Are there attempts at regulating ICOs in any way?
ICOs are a matter of great interest all over the world. We are getting a lot of requests from companies who want to open a Swiss office for their ICOs. They are attracted by the liberal legislation, efficient mechanisms of government support, legal support and advanced technologies. According to statistics, over the last year companies have raised more than half a billion dollars through ICOs in Switzerland. However, initial offering in a crypto-currency is still a ‘grey area’ and needs regulation. FINMA is now closely involved in establishing a regulatory framework for ICOs. Clearly, the legal side of it is important for our Association. MME, a law firm and our founding member, is working with projects for ICOs in Switzerland. As an example, they have supported the launch of the Ethereum Foundation and the world's first ICO.
– What is the right time for an ICO? Some experts say that many companies are willing to launch an ICO already on the stage of a white paper, or concept. Is it reasonable?
It makes more sense to an investor to invest in a ready product and team to minimize potential risks. However, looking for an investment at the white paper level only is by no means a new approach. Similarly, in a classical investment chain you can raise money at the concept stage and use it to build your team and run the processes required for market penetration. After that you go to business angels and seek venture capital. Of course, raising capital at the concept level can pose a significant risk to both investor and business.
One of the key concepts of blockchain is that not only you create a company to produce a specific product, but also you can establish a new decentralized industry, a new kind of market. A good illustration here would be Ambrosus, an EPFL spin-off. Their team wants to use blockchain to support food products along the entire production chain. This is how they intend to create an industry with many companies offering multiple products and services.
Projects of that kind are initially quite difficult to monetize, and investment in its classical shape is probably not what is needed here. It would make more sense to issue tokens to open up market access and give the project team additional resources for development. This is why an ICO, or TGE [Token Generation Event], is the best solution for companies in that category.
– What is your advice to blockchain start-ups who wish to do business in Switzerland? Where do they start and how do they access Switzerland’s innovative ecosystem?
It's all very simple. Come to Switzerland as the first step. Visit our website, look at our future events and choose what you like. At our meetups, you can have an informal talk with businessmen and government officials. In addition, you will get a sense of the city, the people, the environment, and you will speak with cantonal representatives. Swiss culture is an open culture. People here are very helpful and forthcoming, and they will tell you everything you want to know.
For additional information about various aspects of doing business in Switzerland, please refer to our Handbook for Investors or contact representatives of Swiss Business Hubs.
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