The possibilities for Blockchain technology and digital assets are very broad. But when it comes down to it, the biggest question is whether it will ever gain acceptance and thus traction, says Efi Pylarinou, Global FinTech and Tech Influencer. “To my mind, the biggest question within the whole Blockchain debate is whether Blockchain will go on to serve as a major piece of infrastructure, complementary to existing payments rails,” she says.

The simplest way to think about it is that instead of money flowing through bank accounts attached to IBANs, they run on the Blockchain rails instead. If the industry can use Blockchain as the infrastructure for capital flows and for exchanging assets within capital markets, then we get efficiency, transparency, and cost savings. The end consumer may not realise the impact immediately, but having the settlements, clearing, and reconciliation on a Blockchain will make a huge difference.

Several initiatives and start-ups are working towards this end goal. The Swiss Stock Exchange has launched the SIX Digital Exchange (SDX), the world’s first fully regulated Financial Market Infrastructure offering issuance, listing, trading, settlement, servicing, and custody of digital assets. It went live in October.

“The launch of SDX is an important milestone for the entire industry. It is already enabling the issuance of tokenised bonds and tokenised shares of private companies (from small to medium enterprises). This will enable the democratisation of private markets and fractionalisation of existing financial securities, on top of the efficiencies gained. The network effects that this kind of infrastructure unlocks are currently underestimated. The investment industry will be able to build new profitable businesses and offer more access and better customer service,” Pylarinou says.

The issuance of the first tokenised shares are shares of F10, the international FinTech and Insurtech Innovation Ecosystem headquartered in Switzerland, whose shares will be traded on the SDX DLT platform while the share registry services will be provided by Aequitec.

Pylarinou believes that the Swiss industry’s other big advantage is its outstanding and international reputation around security and data management. Metaco is an example of this kind of trust, as it has been selected by Societe Generale-Forge, Citi Partners, and BNP Paribas Securities Services this year as the provider to develop its custody capabilities.

“SDX and other players like Mt. Pelerin and Gentwo are providing the technology to tokenise all sorts of assets, and other players like FIAT 24 are offering FINMA licensed digital banking on a core banking system built entirely on the Blockchain – more examples of the Blockchain being used as an infrastructure play,” she says.

Asset management for the new digital assets class (for now, dominated by cryptocurrencies, but this is soon going to change) is another potential use case for the industry.

“There are plenty of companies looking to offer services for the tokenisation of non-bankable assets (art, wine, luxury products, commodities, rights etc.) and others that are structuring financial products (in traditional wrappers) but with cryptocurrencies underlying,” says Pylarinou. She says there are around 15 providers for token issuance in Switzerland.

There are many cryptocurrency exchange-traded products (few are listed on SIX or other European exchanges), and most are not listed but with an ISIN - Actively Managed Certificates (AMC). 21shares is the largest Swiss provider of passive, listed cryptocurrency investment vehicles.

Crypto Finance AG is one example of an AMC issuer, but it also offers institutional and professional clients trading and storage. And Deutsche Börse recently acquired a majority stake in Crypto Finance.

Swissborg is a good example of a digital-first, Swiss-licensed provider to trade and store cryptocurrencies and an innovator of basket cryptocurrency products.

The Swiss superpower
But where does Switzerland come into this? It is one of many jurisdictions looking to innovate and present itself as a leader in this area. Pylarinou says that Switzerland’s superpower in the whole mix is high levels of regulatory clarity. With the recent introduction of DLT legislation, which created transparent and business-friendly framework conditions, the allure of Switzerland has grown.

Back to the big picture and the future
At Davos during WEF 2022 this past spring, the Swiss government announced a public-private initiative - the Home of Blockchain.swiss - to grow and strengthen the Swiss digital assets ecosystem. Together with leading Blockchain players, Home of Blockchain.swiss aspires to make foreign companies increasingly aware of Switzerland’s many strengths and advantages. The initiative will release Blockchain-related publications, participate in global conferences, and start a media campaign.

Pylarinou comments: “There is the commitment and the regulatory framework to make Switzerland, not only a top crypto nation but also to have a significant impact beyond its borders. The collaboration between the public and the private sector is a significant development. Switzerland is a culturally decentralised nation, and we all know that digital transformation is first and foremost about culture rather than tech.”

This article is from The Wealth Mosaic’s Swiss WealthTech Landscape Report 2022. Access the full report here.