Switzerland’s government has expressed concern about its largest banks refusing to serve startups in the cryptocurrency and blockchain niche. While banks may fear the possibility of giving their competition a leg up, Switzerland is concerned about possibly losing its competitive edge.
Government Officials Concerned About Economic Impact of Banks’ Attitude Toward Crypto
When two large Swiss banks pulled the plug on more than 20 cryptocurrency startups, officials in the Swiss government expressed concern that banks could so easily pick and choose who they want to serve. Zuercher Kantonalbank recently dumped more than 20 startups and another unnamed bank dumped a tokenized investment firm called Smart Valor.
Smaller banks such as Banca Zarattini and Hypothekarbank Lenzburg seem to be less picky about serving startups that rely on cryptocurrencies as a source of revenue.
Government officials’ primary concern is that cryptocurrency- and blockchain-related companies create hundreds of jobs in the relatively cryptocurrency-friendly Switzerland. Without access to banking services, it is more difficult for these companies to handle essential operations such as covering their overhead costs. Swiss National Bank governor Thomas Moser has indicated that these startups have requested assistance.
“We would not want to close the door on the opportunities that such innovation might bring,” said Moser.
Switzerland’s Finance Minister, Ueli Maurer, recently set up a working group to study the ways that banks can more effectively work with cryptocurrency startups. However, this may not stop mainstream banks from pushing back against what they see as growing competition from cryptocurrencies that do not rely on banks to function.
Switzerland Not the Only Country to Express Concern
In other countries, banks have been blasted for engaging in anti-competitive practices. The UK’s FCA, for instance, concluded that banks deny customers in the cryptocurrency niche “on a wholesale basis” in a report on their successful cryptocurrency and blockchain sandbox.
“There are … apparent inconsistencies within individual banks regarding how they apply their assessment criteria in approving access to banking services,” the report stated.
While it was unclear whether the FCA would do anything about banks’ anti-competitive actions, it did take the unusual step of refusing to accept the usual flimsy excuse of combating money laundering for the actions of big banks. The report effectively stated that it’s one thing to fight money laundering and quite another to punish innocent startups that are simply attempting to build on blockchain technology for the actions of a few guilty parties.
Cryptocurrency Startups May Create Their Own Solution
Some startups have decided to take the ICO route in the hope of gaining a banking license so that they can serve startups that have been left out in the cold by mainstream banking. None of them have managed to get a banking license (yet), so for now, they have to work with some of the friendlier banks.
Even some of these “friendly” banks can be intractable when it comes to serving startups in this niche. Bank Frick, for instance, accepts trading in Bitcoin, Litecoin, Ripple, Ethereum, and Bitcoin Cash, but also turned away 90% of the 160 cryptocurrency and blockchain companies that applied for services.
Switzerland’s government may be concerned that this will cause the country to lose its competitive edge in an environment where many European countries had a roughly equal number of ICOs in the past year. This may be bad news for its big banks but good news for companies in Switzerland’s “Crypto Valley” that have had trouble finding and keeping banking services.