Switzerland’s Crypto Valley fared relatively well in 2022, despite the strong headwinds faced by the global crypto industry. Although most people think of cryptocurrencies when they consider the crypto sector, its future actually relies on the technology crypto is based on – blockchain. Here, Switzerland has a strong competitive advantage, both from a technical and a regulatory point of view.
Last year was an annus horribilis for the global blockchain ecosystem. The total market value of cryptocurrencies plunged by almost two-thirds to 797 billion US dollars (730 billion Swiss francs) during 2022, data from the website Coin Market Cap show. Crypto markets tanked as the world’s central banks started to raise their interest rates to curb the rapid rise in inflation. Investors turned their back on the riskier asset classes they had turned to during the long period of negative interest rates. In November, the crypto market suffered another massive blow: the collapse of the centralized crypto exchange FTX and the subsequent imprisonment of its founder and CEO suspected of having committed one of the biggest financial frauds in American history.
Steady number of Swiss crypto start-ups
The total number of firms in Crypto Valley nevertheless remained steady, with a marginal increase to 1,135 at the end of 2022, the Top 50 report 2022 released by the Zug-based investment firm Crypto Valley Venture Capital (CV VC) shows. For the time being, there are no official statistics on blockchain companies available, only figures that come from the industry itself.
The canton of Zug remains the heart of the Swiss market with more than 500 cryptocurrency or blockchain based there, followed by Zurich, Liechtenstein, and Geneva.
The sector’s total number of employees last year fell slightly to around 5,800 people. The market cap of Crypto Valley’s 50 largest blockchain platforms was worth 185 billion US dollars at the end of 2022 down 70 percent compared to a year earlier, but hiring continued. The number of people working for these 50 entities increased by nearly 25 percent to 1,248 employees during the year.
Nine Swiss unicorns up and running
Crypto Valley today counts nine unicorns, privately held startup companies with a market value exceeding 1 billion dollars. Seven of these are blockchain platform unicorns (Ethereum, Cardano, Dfinity, Near, Cosmos, Solana, and Web3 Foundation). Two commercial company unicorns have joined the unicorn herd for the first time: 21.co, the world’s leading issuer of cryptocurrency exchange traded products (ETPs) and the digital asset manager Safe.
The Swiss blockchain ecosystem also managed to attract additional funding in 2022 amid the storm in the crypto market, data from the CV VC report show. Committed capital increased by 85 million dollars to 3.2 billion dollars, with FINMA licensed digital assets bank SEBA Bank attracting most funding.
Sound regulatory framework, a competitive advantage for Crypto Valley
The greatest potential of crypto markets does not lie in the cryptocurrencies themselves but in the blockchain technologies on which they are based. Blockchain is valued as a transparent, reliable, and non-manipulable technology. The technology could be part of the solution in countries that do not have reliable means of payment, authorities, and registers, such as cadastral registers.
As the figures above show, Switzerland is already a world leader in blockchain technology, but it holds another coveted competitive advantage: the regulatory framework in place. The Swiss “regulatory bodies benefit from an outstanding and deserved reputation for dynamism, liberalism, openness, knowledge, precision, and strictness. Adding to this, entrepreneurs can proactively reach out and discuss pieces of regulation. The exemplary regulatory landscape in Switzerland and Liechtenstein is a major strong point for Crypto Valley and for the region’s global business positioning,” CV VC writes in its annual report.