SwissBanking
The online magazine of the Swiss Bankers Association
December 12, 2018

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The Arc Lémanique is a prime hub for blockchain startups

The Arc Lémanique is a prime hub for blockchain startups

Less in the spotlight but certainly not less vibrant and dynamic: The Arc lémanique is on track to become a global prime destination for the blockchain industry. For insight, Adrian Schatzmann, Strategic Advisor for the Swiss Bankers Association (SBA), spoke to Fedor Poskriakov, Secretary General of the Capital Markets and Technology Association (CMTA) and Partner at Lenz & Stähelin, as well as, Sébastien Dessimoz, Managing Partner & Co-Founder of Taurus Group.

Insight: Mr Poskriakov, can you describe the Blockchain ecosystem in the Arc lémanique?

Fedor Poskriakov
Fedor Poskriakov, Secretary General of the CMTA and Partner at Lenz & Stähelin
Fedor Poskriakov: Geneva and the Arc lémanique in general have a vibrant and dynamic blockchain and digital assets ecosystem, with dozens of businesses already established and thriving, including blockchain-based services and platforms, together with all services that support them including research, education, legal, consultancy and technology. With the support of local governments (economic development), numerous initiatives are flourishing across industries, including finance, commodities trading, supply chain and real estate to name only a few. Those draw on a pool of talents stemming both from the EPFL (École polytechnique fédérale de Lausanne) and the Geneva University locally, but also attracting talent internationally. Although maybe less mediatized, the Arc lémanique, which some call "Crypto Lake", is a prime hub for distributed ledger technology startups.

Mr Dessimoz, you as an entrepreneur, why did you choose the Arc lémanique as the company domicile for your start-up?

Sébastien Dessimoz
Sébastien Dessimoz, Managing Partner & Co-Founder of Taurus Group
Sébastien Dessimoz: Taurus Group is a swiss financial services firm specialized in digital assets and blockchain. Our vision is that the worlds of traditional financial assets and digital assets are converging. Setting up our firm in Arc lémanique was a logical choice for two main reasons: (1) Clients – here we have close access to a very vibrant and diverse economy with in particular globally leading players in the financial and technology sector. (2) Talents & expertise – talents in the blockchain and digital assets space are scarce. Working close to EPFL is a differentiating factor: it allows us to source top quality engineers and build the best possible products. That being said our ambition goes beyond the Arc lémanique. We already have important clients based in Zurich and Zug.

Mr Poskriakov, how important is the proximity to the EFPL?

Very important of course. The EPFL is a world-class internationally recognized center of technical research, development and education. The proximity allows local innovative businesses to harness a diverse talent pool and also spawns numerous businesses built around new technical developments. For example, the EPFL Innovation Park is integrated in the core of the EPFL research center (more than 300 labs and 10'000 students) and offers start-ups attractive working space options, facilities and other support services, and therefore functions as an accelerator.

Mr Poskriakov, can you introduce us to the Capital Markets and Technology Association (CMTA) and what role your association plays for the Arc lémanique?

The CMTA aims at facilitating the use of distributed ledger technology (DLT) in the field of capital markets, by developing open standards and best practices covering all aspects of digital assets (e.g. corporate, regulatory and technology). The CMTA is a Swiss national platform to gather expertise from the various relevant disciplines, e.g. technology, financial intermediation, law and accounting, to pursue its overarching objective, based on the premise that DLT has the potential to simplify the financing of companies and democratize their access to capital markets. One of the association strengths is its diverse membership. The membership of the CMTA comprises both established players (such as innovative banks and technology firms) and new fintechs. All members have a strong willingness and commitment to contribute their expertise and resources to the joint development of open standards.

Mr Dessimoz, can you explain what a digital asset is in a few words?

A digital asset is a digital representation of any type of asset (e.g., currency, security, right or claim) or notional unit of account (e.g., cryptocurrencies) registered on a distributed ledger, such as a blockchain. As of today, the digital asset market is a USD >100 billion market, mainly driven by crypto-currencies. However, we expect the next wave of growth in the digital assets arena to come from securities, such as equities or bonds, on the blockchain. Ultimately, DLT will offer scalable, easily accessible and compliant tools for businesses to raise capital in a secure manner at a fraction of today's costs of capital market transactions, whilst offering the same investor protection. At the beginning, the blockchain industry was mainly focused on the issuance of payment tokens and utility tokens, with no or limited associated rights. For examples, utility tokens entitle holders to a discount, or may be exchanged for goods or services from the token issuer, like vouchers. Today the trend is towards the issuance of so-called securities tokens.

Mr Dessimoz, so will we trade the likes of Nestle and Novartis as a token in 10 years?

We will probably not trade large caps, such as Nestle and Novartis as “tokens”. Nestle and Novartis shares will continue to be structured as traditional securities; however, the main change will be that it will be traded, cleared and settled on a blockchain-based infrastructure as a digital asset. The advantages are numerous e.g., faster settlement time, lower cost, fully automated proxy voting & corporate processing, instant transparency on the shareholders. A number of companies are building the required infrastructure, including Taurus Group, which has developed a digital asset storage platform for banks and exchanges.

Mr Dessimoz, Mr Poskriakov, to further advance Switzerland as a leading blockchain nation: What is now most needed?

Sébastien Dessimoz: We see two factors that go hand in hand:

  • Regulation, standards and best practices. Switzerland should continue its leading role in the development of a technology neutral, principles-based legal and regulatory framework which can adapt to new technological developments while still protecting investors. The collaboration and communication between authorities, the private sector, and associations such as the SBA or CMTA is key to achieve this goal.
  • Quality and sustainability: The emergence of high quality, professional players that will strengthen the Swiss ecosystem by setting international standards, in a sustainable manner, in particular in the area of issuance, exchanges, trading venues, and custody of digital assets. We see a number of new fintech, as well as established players working hard to achieve this, by developing institutional grade services and products.