The Swiss government has proposed a law that inadvertently threatens Switzerland’s excellent position in the international race for becoming the preferred jurisdiction for crypto startups. In particular, the federal council drafted legislation to comply with the latest recommendations of the “Global Forum for Transparency and Taxation” of the OECD. In order to increase transparency regarding the beneficiary owners of Swiss companies, the draft proposes (among other things) to make bank accounts mandatory for all legal persons! This law threatens our very existence. If enacted, Bitcoin Association Switzerland would not be allowed to exist any longer as it is unlikely that we would find a Swiss bank that provides us with an account. Getting a bank account sounds simple, but for crypto startups it is not. Most Swiss banks refuse to enter into a business relationship with any entity that has “Bitcoin” in its name or is otherwise related to crypto currencies or blockchain technology. This is not unlike the situation in Israel, where bank Leumi tried to close the bank accounts of a local exchange, but was fortunately stopped by the supreme court. Despite all their public affirmations to be supportive of innovation and the blockchain, Swiss banks did not produce much of value so far in that regard. Dr. Avi Rapaport, manager of the RapFlag fund, even suspects a coordinated effort by banks all over the world to suppress the blockchain ecosystem, as he writes in his December newsletter. I for one am skeptical about conspiracy theories and stick to Hanlon’s razor: one should never attribute to malice what can be explained with incompetence.
However, there is no need to panic as this stage. The proposed law is just that: an early proposal. It currently is in the stage of public review. At this stage, anyone can send their comments about the law to the department of finance, who reviews them and may or may not adjust the proposal in response to these comments. We greatly appreciate this opportunity and have formally handed in an according comment today. It points at a much lighter, less invasive variant that would not give banks a new supervisory role and still satisfy the demands of the global forum. However, our preferred resolution would be to discard the proposal entirely, as already today the cost of regulation in the financial sector greatly outweighs its benefits. Interestingly, the accompanying comment by the federal council does not even try to argue that the proposed law is a good idea in itself, the only argument they bring forward in favor of the law is that it would reduce international pressure to provide more Swiss corporate data to foreign governments. Maybe I’m naive, but I think this is a pitiful reason to create a law. Laws should be created because one is convinced that they are good and sensible measures to improve the legal framework of a country, and not because of international peer pressure. Also, I do not believe that this is a sustainable way to reduce international pressure. Committees like the “global forum” would lose their raison d’être if they ever came to the conclusion that there is enough transparency, so they come up with new and stricter regulation at every round of reviews. Fortunately, some of the major parties (the SVP and the CVP) have previously commented critically on a similar proposal, so there is a good chance it will be watered down on its way through the parliament (if it even gets that far).