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PwC’s Strategy&: Security Token Offerings ‘are Not Fundamentally Different From ICOs’

PwC’s global consulting subsidiary Strategy& has published an ICO and STO report in collaboration with Swiss Crypto Valley.

Security token offerings (STO) are becoming more popular, relative to initial coin offerings (ICO), according to a new report by Big Four firm PwC’s global consulting subsidiary Strategy&. Released on March 8, the firm’s forth ICO and STO report was developed in collaboration with the Swiss Crypto Valley Association.

According to the joint report, STOs “are not fundamentally different from ICOs.” The document states that STOs are “a more mature and regulated form” of fundraising, noting — given the definition of a security — that the tokens sold in an STO can provide investors with various financial rights.

STOs, the report claims, also combine a number of ICO features, such as low entry barriers for investors, as well as traditional venture capital and private equity fundraising characteristics, such as Know Your Customer (KYC) and Anti-money laundering (AML) regulations.

With that, the overall number of both STOs and ICOs has declined significantly in the second half of 2018, which was allegedly caused by the ongoing crypto winter, as well as by the shift from the ICO to the STO model, the report says.

Out of total of about $19.7 billion raised by 1,132 ICOs and STOs in 2018, two projects accounted for over $5.8 billion of the volume, the report notes. Those companies are the Eos Foundation, which carried out the largest ICO in history, reportedly raking in over $4 billion in June 2018. The second ICO giant is Telegram messenger, which raised an also impressive $1.7 billion in two private ICO rounds for its TON crypto platform.

ICO/STO development from 2013 to 2018. Source: Crypto Valley

ICO/STO development from 2013 to 2018. Source: Crypto Valley

The report from Strategy& and Crypto Valley also noted the trend of the tokenization of commodities such as gold and oil, as well as the tokenization of intellectual property.

The United States Securities and Exchange Commission has long reminded investors that many tokens sold in ICOs are in fact securities under U.S. law, and thus should be registered with the agency.

Recently, Cointelegraph has reported that while ICO market is smaller that it was in 2018, it is still larger that it was at the beginning of 2017.

Earlier in February, ICO rating service ICObench reported that ICOs in Q4 2018 raised 25 percent less than in Q3, while the total number of ICOs increased.

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Crypto Valley Association ‘Looking Into’ Improper Conduct by Member Platform Blue Trading

The trading platform has said it is closing permanently following a major software problem that reportedly lost funds.

Swiss cryptocurrency industry organization the Crypto Valley Association (CVA) is investigating allegations of foul play by one of its members after the platform closed down last month, CVA officials confirmed in a statement on Feb. 28.

According to its website at press time, Blue Trading, also known as BlueTrading, shuttered investment services after what it described as a software malfunction, discovered Feb. 21, caused widespread losses of funds.

At the same time, the platform’s owner, BluVenture Group Ltd., has faced considerable controversy over its legitimacy claims from international finance bodies.

“The CVA has been approached by various persons regarding the Blue Trading platform,” the association’s statement reads, continuing:

“We are currently looking into allegations expressed publicly against Blue Trading of inappropriate business conduct, based on the CVA’s General Code of Conduct.”

BluVenture Group faced expulsion from Hong Kong brokerage standards body the Financial Commission in September last year.

A statement issued at the time warned:

“Effective September 26, 2018, BluVenture Group Ltd and its affiliated brands BlueBroker and BlueTrading were expelled from membership with the Financial Commission due to repeated violations and failures to adhere to membership Rules and Guidelines.”

The Hong Kong move was preceded by a warning from the United Kingdom’s finance regulator the Financial Conduct Authority, which accused BluVenture Group of operating financial services without permission.

According to BlueTrading, users currently have until March 15 to withdraw funds from their accounts before the service permanently closes.

“We sincerely apologize for this very disappointing event and wish we could continue operating but it is not possible at this time,” the message on the platform’s website explains.

The CVA, centered in the Swiss town of Zug, consists of a growing number of blockchain and cryptocurrency startups and seeks to build a supportive regulatory environment for the technologies with the local and national government.

In December, the initiative was ranked as the fastest-growing tech hub in Europe.

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Building With the Enemy: It’s the Crypto Network That Makes Us Strong

Ian Simpson is chairman of communications at the Crypto Valley Association, an organization that supports the Swiss blockchain sector. The following is an exclusive contribution to CoinDesk’s 2018 Year in Review.  “Grin and bear it,” they say. And in the current crypto market conditions, many people, on all sides, are “bearing” it, most without any grin […]

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Swiss Blockchain Company Gains Regulator Approval, Seeks Banking License in 2019

Swiss blockchain startup Smart Valor has won approval from the country’s regulators to operate in the local financial market, Reuters reported September 5.

Smart Valor will be regulated by the local Financial Services Standards Association (VQF) rather than the national regulatory agency, the Financial Market Supervisory Authority (FINMA). The VQF is authorized by FINMA to check anti-money laundering (AML) compliance.

Status as a regulator-approved financial intermediary will purportedly give Smart Valor more credibility, as it will be actively supervised for AML compliance. However, it was not clear whether other blockchain-related companies in the country have won approval as financial intermediaries. Both FINMA and VQF declined to comment.

According to Reuters, Smart Valor plans to launch an online platform for alternative investments, including cryptocurrencies, in the fourth quarter of 2018. The company is also applying for a banking license, which the firm hopes will allow it to offer securities investments in the first half of 2019.  

Smart Valor founder Olga Feldmeier told Reuters that tokenization is going to change the way people approach investing:

“Tokenization transforms the way people own things, improves liquidity, and makes these investment opportunities accessible to a broader audience of investors.”

Switzerland is among several countries who are actively adjusting and creating legislation to welcome blockchain projects. As Cointelegraph previously reported, the country is home to a world-famous Crypto Valley located in the canton of Zug.

In early July, local companies aided the Zug government in trialing blockchain technology in local online voting system. The non-binding trial vote involved 72 out of 240 citizens with access to the online voting system.

Smart Valor was founded in 2017 by Olga Feldmeier who had previously worked for China-based Bitcoin wallet Xapo. Feldmeier founded the firm in an effort to disrupt the Swiss banking system.

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Daniel Diemers From PwC Strategy& Switzerland: Adoption of New Technologies Requires More Education

Blockchain technology is predicted to have a great future in Switzerland. What does this mean for the labor market, what does the Swiss government think about this technology and what does blockchain need in order to be adopted by the people? Cointelegraph discussed these questions with expert Dr. Daniel Diemers at BlockShow in Berlin.

Daniel Diemers worked as an entrepreneur for several years in the field of internet-based early warning systems. He has been a partner at PwC Strategy& since 2005, where he advises banks and regulators in Europe and the Middle East on digitalization, fintech and blockchain. Daniel Diemers is also a co-founder and board member of the Swiss Finance + Technology Association (Swiss Fintech) and a fintech investor himself.

About PwC and blockchain

Cointelegraph: As early as mid-May, there were reports that PwC’s Strategy& was working on blockchain in the logistics sphere. What does PwC’s work with this new technology look like?

Daniel Diemers: We have our own global blockchain team. For example, I’m head of the blockchain department in Europe and the Middle East. We have many employees who are well familiar with the subject and we are not only working on the use of blockchain in logistics but are also on implementing blockchain in the banking and agricultural sectors. I am a strategist, and I have to clarify various questions regarding blockchain: coding, protocol, cybersecurity, taxes, accounting and how blockchain can be used in this sphere.

About using blockchain and its impact on the job market

CT: In your opinion, what fields need blockchain technology the most?

DD: That’s a very good question. We are discussing banking, insurance and ICOs — as well as financial services — a lot. I see a particularly huge need for this technology right here. But if you look at how the blockchain will develop and where it will be used, according to statistics, you will see a lot of services and applications outside of the financial world. For example, the energy sector, agriculture, healthcare, but also logistics [and the] Internet of Things (IoT).

We expect that the blockchain will be used in 80 percent of the industry. Administration, voting, banking, insurance — these are the first steps.

CT: Many politicians and heads of major financial institutions are critical of cryptocurrencies, but have positive things to say about blockchain technology. Commerzbank reportedly already has a ”DLT Lab.“ What do you think is the reason for that?

DD: That was the case last year. I believe that their opinions are slowly changing. Now there are more and more banks that are also dealing with cryptocurrencies, having their first projects. There are also banks, now, that accept cryptocurrencies as a means of payment. I am sure we are in a very exciting process right now. The entire financial services industry, banks and insurance companies will be dealing with cryptocurrencies.

CT: Are you not worried that blockchain might replace many jobs in the financial sphere?

DD: I don’t understand this fear, yet. Mostly we are discussing artificial intelligence and robotics. Blockchain can have a similar impact, of course, because it can actually increase productivity in an efficient way. Some things I had to do before — such as bringing different data systems together — I may not have to do with the help of blockchain anymore. But I don’t feel like blockchain is a so-called job killer. But if we look at this technology in connection with artificial intelligence then yes, then a lot of jobs could disappear.

CT:  Are you saying that blockchain and artificial intelligence could replace you?

DD: I’d do some reflecting here. I don’t want to think that these two technologies and robots can replace me — and I don’t recommend thinking that way. I think the next five to 10 years will be very exciting and we’re going to have to expect many changes. You don’t have to be afraid of such changes — and when people are a little afraid, it’s just a human reaction to new things. Like, I hear about cryptocurrencies for the first time, I don’t like them, so Bitcoin is not good. But soon that will change. Now, the next generation is coming up. Young people growing up with smartphones. They are like, my bank is my smartphone. They don’t even get to see any plastic cards — they’re shopping online. And they think cryptocurrencies are normal or even cool.

About “Crypto Valley” and Swiss e-franc

CT: How popular is crypto in Switzerland? When will the Swiss people be using cryptocurrencies as a means of payment?

DD: Crypto Valley in Switzerland has not existed for long — it’s less than two years [old], but it has grown enormously. Two or three years ago, there were perhaps 10-15 companies, while today, there are around 300-400 companies that already have a branch in the Swiss Crypto Valley — and all of them are involved in the crypto sphere: ICOs, blockchain startups. The Swiss people are also aware of these developments because there are a lot of media reports about them, people read and talk about them. The Swiss government is also trying hard to understand it.

The Swiss Federal Council has established a blockchain task force to promote its adoption in the country. I was also allowed to have a seat there, which was so exciting because we were 35-40 experts from all over Switzerland, from different fields and with different experiences. Together we pondered questions about what our citizens are interested in, what is positive and negative, what the state yet has to do and, yes, whether the state has to do anything at all.

I believe that in most European countries, compared to Switzerland, the general population has not yet dealt with crypto and blockchain. If we just randomly select 10 people on the streets of Berlin and ask them about blockchain, ICOs and cryptocurrencies, we’d find that they are not very familiar with the topic. Adoption of new technologies requires more education.

CT: Switzerland has plans to launch its own state cryptocurrency. Do you think this is a good idea?

DD: Correction: that has not yet been decided. We have a very decentralized and democratic governance in Switzerland, and all new ideas will be welcomed and discussed.

Right now, we are discussing whether we want a national cryptocurrency — e-franc or crypto-franc — in Parliament. There are also different people from the crypto community who deal with this matter and give us [the] first ideas — and we discuss it all together. I think that’s very good about Switzerland.

I don’t think that’s a bad idea. When I’m travelling, I’m using local currency in other countries. In some cities, I’m using Bitcoin and other cryptocurrencies. Why, then, shouldn’t I use a cryptocurrency, perhaps issued by the Swiss government, which is legally supported by the government and the Swiss National Bank?

CT: And what are your thoughts on the new FINMA ICO regulations? Do they actually provide more clarity?

DD: Yes, absolutely. The government, investors and even entrepreneurs who want to launch ICOs in our country need some regulatory certainty.

Nobody wants to invest money in an ICO, lose it all after six months, and the court not knowing how to deal with scams like these under existing laws.

A healthy regulation is necessary, and Swiss investors consider these FINMA rules to be very important. This is different in Asia — some countries do not want to work with ICOs, so they simply ban them.

About three things that blockchain needs

CT: You mentioned that Swiss media reports are positive when it comes to blockchain and cryptocurrencies. In your opinion, do people tend to overestimate their knowledge of the opportunities and risks of cryptocurrencies as an investment due to intensive reporting?

DD: Yes, I think so. First of all, you need quality journalism and very good journalists who go in-depth and who do not randomly throw in superficial topics. Secondly, there is also a need for good, reasonable regulation that offers certain protective measures and educates people about the risks. You shouldn’t just say that this and that is bad and speculative, but also give advice on how to invest in which currencies [and] in the best way possible. And lastly, there is a need for a lot more information and education: children should have to learn what blockchain is and about its advantages and disadvantages at school.

There is a lack of educational opportunities for adults and there are only few people who can really teach this topic. I believe there is a great challenge ahead of us, and all teachers have to think of good ways to explain what blockchain and cryptocurrencies are and how to deal with them reasonably.

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Crypto Valley’s Zug to Run Switzerland’s First Blockchain-Based Municipal Vote

The Swiss city of Zug will conduct a blockchain-powered trial municipal vote this summer, local media outlet reported June 8. The event, which is scheduled to take place between June 25 and July 1, will reportedly be Switzerland’s first municipal vote using blockchain.

According to the report, the upcoming trial vote will implement the city’s digital ID (eID) system that was launched in November 2017. The system will allow citizens to vote via their mobile devices.

Apart from voting on minor municipal matters, citizens will also be asked if blockchain-based eID system should be used for referendum votes in the future. Since the upcoming vote is a trial, its results will be non-binding for city authorities, reports.

Having established “Crypto Valley”,  a global hub for crypto and blockchain development, Zug has become one of the centers of “world’s leading ecosystems for crypto, blockchain, and distributed ledger technologies.” In 2016, Zug launched an initiative accepting Bitcoin (BTC) as payment for certain municipality services.

Thanks to the presence of “Crypto Valley” and the country’s tax-free policy for crypto investors, Switzerland is reportedly the number one most blockchain-friendly country in Europe.

On June 6, the privately held Hypothekarbank Lenzburg bank, became the first bank in Switzerland to provide business accounts to blockchain and cryptocurrency companies.

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Swiss Bank Becomes First in Country to Offer Business Accounts to Crypto Companies

Hypothekarbank Lenzburg has become the first bank in Switzerland to provide business accounts to blockchain and cryptocurrency companies, Cointelegraph auf Deutsch reported June 6.

While Falcon Private Bank has provided crypto asset management services since last year, Hypothekarbank Lenzburg CEO Marianne Wildi confirmed that they are first bank in the country to open company accounts for blockchain and crypto-related fintech companies. Wildi said:

“As a bank that sets itself up technologically and pursues a cooperative strategy in the field of fintech, it is also a matter of credibility to work together with the young sector of crypto and blockchain companies in Switzerland”.

Wildi noted that she was aware of “the money laundering problem in the area of ​​crypto companies and Initial Coin Offerings (ICOs)”. The bank reportedly examined the relevant risk and compliance issues “very precisely,” in addition to informing the Swiss Financial Market Supervisory Authority (FINMA) before deciding to cooperate with crypto startups.

According to Wildi, the Hypothekarbank Lenzburg is reportedly very selective in accepting new customers, and recently has taken on only two companies from the crypto industry. Before accepting a new client, the bank performs a rigorous due diligence process.

The Swiss canton of Zug has become a global hub for the cryptocurrency industry, taking on the monicker “Crypto Valley.” Despite the influx of crypto business, restrictive bank policies toward crypto companies forced firms to look abroad for banking services.

Bank Frick of Lichtenstein, for example, sees no compliance issues or risks to their reputation in doing business with Swiss crypto companies. In February, Bank Frick introduced direct crypto investment and cold storage services for Bitcoin, Bitcoin Cash, Litecoin, Ripple and Ethereum.

The Principality of Liechtenstein has become a major financial hub in Europe and aims to play a pivotal role in the fintech industry as well. In March, the government introduced comprehensive blockchain legislation, regulating blockchain business models and underlying blockchain systems.

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World’s Fifth Largest Crypto Exchange Bitfinex Wants To Move To Switzerland

British Virgin Islands-based Bitfinex, the fifth largest crypto trading platform in the world in terms of trading volume, intends to relocate its business to Zug, Switzerland, Cointelegraph auf Deutsch reported Tuesday, March 27.

Jean Louis van der Velde, CEO at Bitfinex, confirmed the exchange’s plans to  the Swiss business newspaper Handelszeitung Tuesday. The Bitfinex leadership has reportedly met several times with the State Secretariat for International Finance SIF and also with the Federal Councilor Johann Schneider-Ammann, who heads the Economic Department of Switzerland.

“We are looking for a new domicile for Bitfinex and the parent company iFinex, where we want to merge the operations previously spread over several locations,” said van der Velde der Blatt.

Settlement experts in Switzerland, who are familiar with the matter, say that Bitfinex will be incorporated as a public limited company on a move from the British Virgin Islands to Switzerland and will therefore be spun off from the previous parent company, iFinex. The current management team, headed by Dutchman van der Velde, plans to settle in Switzerland as well. Both the legal and financial departments, as well as the technical department would then operate from Switzerland in future.

Though the exchange is also considering London as a possible alternative, Switzerland is “on top of the list of jurisdictions,” said van der Velde to the Handelszeitung, continuing that the exchange is ready to work with regulators to comply:

“We want to be the most transparent of all exchanges and meet the requirements of the Swiss regulator.”

Zug has proved an attractive location for crypto companies other than Bitfinex. Internationally active Blockchain startups such as Xapo, ShapeShift, Monetas and Etherisc are based in Zug, as well as Ethereum’s foundation and management.

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Swiss Government Launches Blockchain Task Force

The Swiss government has launched a new group to cement its regulatory framework surrounding blockchain startups and ICOs.

Taskforce Blockchain – spearheaded by Finance Minister Ueli Mausrer and Economics and Education Minister Johann Schneider-Ammann – includes both federal and local officials, as well as members of various blockchain startups and legal representatives, according to a fact sheet.

The group will look at the legal guidelines surrounding ICOs and other blockchain companies, while working with the State Secretariat for International Financial Matters – the federal body responsible for implementing financial market policy and representing the government’s financial interests across borders.

Schneider-Ammann praised the inclusion of blockchain companies in the conversation surrounding their legal framework.

He added:

“[Blockchain is] becoming more important as a technology for many industries, not just crypto finance. [What is needed is liberal regulation], which opens opportunities for Switzerland’s position while at the same time reducing risks.”

Switzerland has long been friendly toward blockchain startups and cryptocurrency organizations, and is home to “Crypto Valley,” a region in the country known for the number of companies developing projects based on the technology.

Additionally, the government’s Federal Council proposed a regulatory sandbox last year to create a more welcoming environment for startups to experiment with their projects.

Part of this sandbox’s mission would be to monitor the development of new business models inspired by financial technologies. The government also aired hopes to encourage more companies to build their base of operations in the European country.

The Taskforce Blockchain’s first meeting will be on Jan. 12, 2018.

Swiss parliament and flag image via Shutterstock

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It’s Cryptocurrency Valley Time – Swiss Town Next Tech Hub?

A similar ecosystem of technological innovation to Silicon Valley – the very symbol of American technology development and home to some of the major tech companies like Facebook and Google is being attempted to be created in Switzerland in a town called Zug or “Crypto Valley”. It is aiming to become the technological hub and world leader in digital currency and blockchain innovation.

The rise of cryptocurrency and blockchain as a ecosystem and industry has summoned a row of start-ups and projects attempting to capitalize on the industry’s potential. This has also resulted in countries trying alot to become the “leader” in cryptocurrency and blockchain innovation, seemingly because of the economic benefits that can stem from it.

So following the pattern, countriles like Switzerland, Singapore or Israel are racing out for the lead, and the Crypto Valley is Switzerland’s best hit on taking the crown for itself.

With the Crypto Valley Association being established [a Gov-supported institution targeting developing a blockchain and virtual currency ecosystem in the center of Switzerland] the term Crypto Valley was formed.

And as it seems – it was a critical hit towards success! Major entities and powerhouses like Shapeshift, Ethereum, Xap, Tezos, ConsenSys and many many more have made C. V. their home. This benefits even start-ups while setting up shops in the Valley with extensive network which can come true from being in close proximity with the above mentioned giants.

Zug also offers a very business friendly, and low-tax environment, making the Crypto Valley a very attractive destination for start-ups that are looking for a favorable location to establish a base of operations.

Zug has also positioned itself to be the hotbed of ICO activity (a thorough explanation of ICOs can be found here), with a regulatory environment that allows for the establishment of foundations that can be the recipient of ICO contributions.

This relaxed regulatory environment has spawned supporting organisations dedicated to aiding start-ups in the ICO process. For example, Bitcoin Suisse is a well-known Zug-based institution that provides extensive services relating to ICOs, having facilitated over $600 million USD in ICOs to date.

President of Crypto Valley Association – Oliver Busman added:

“We are promoting more than a region: we have founded a global association as a base for the sector’s most innovative and forward-thinking companies, further strengthening Switzerland’s position as a leading center of innovation in this sector.”

Only with the passage of time we can truly see if Crypto Valley can produce the same technological titans like we see in Silicon Valley. However, until now it has cemented its place quite strong and promising.