Switzerland and Liechtenstein Remain Dynamic Centers for Crypto Asset Investments
by Fintechnews Switzerland October 20, 2023Switzerland and Liechtenstein are maintaining their positions as vibrant hubs for crypto asset investments, a leadership that’s manifested by rising adoption of cryptocurrencies and digital assets, increased integration of crypto assets into traditional banking systems and the continuous introduction of new products and services in the sector, a new report by the Institute for Financial Services Zug (IFZ) of the Lucerne University of Applied Sciences and Arts shows.
The 2023 edition of the Crypto Assets Study, released provides an overview of the crypto asset industry, focusing particularly on developments in the crypto asset investment ecosystem in Switzerland and Liechtenstein.
According to the study, the crypto asset industry has shifted from being a segment reserved to young and innovative startups to now being a category of products and services that is being provided by and to established financial providers as well.
Banks and institutions integrate crypto asset offerings
With increased adoption of crypto assets by private and institutional investors, banks in Switzerland and Liechtenstein are ramping up crypto asset efforts and integration.
In April, Switzerland’s fifth largest financial services firm, PostFinance, announced that it would start offering its 2.5 million customers access to cryptocurrencies, including trading and storage capabilities, through a partnership with digital asset bank Sygnum.
Most recently, Sygnum teamed up with Swiss cantonal bank, Zuger Kantonalbank, to launch a mobile-friendly crypto offering, allowing the institution’s customers to buy, hold and trade popular cryptocurrencies including bitcoin and ether.
A survey of 92 stakeholders conducted as part of the IFZ report found that the local ecosystem is catering to this trend, unveiling that most crypto asset providers in Switzerland and Liechtenstein are pursuing a business-to-business (B2B) strategy with 76% of the companies polled targeting non-finance corporates, 71% targeting banks, 68% targeting family offices and 75% targeting other institutional clients.
In comparison, 66% of the companies polled serve private clients and 52% focus on retail clients. Only six companies (7%) exclusively pursue a business-to-consumer (B2C) strategy without additionally serving business customers.
Customer segments of surveyed companies, Source: Crypto Assets Study 2023, Institute for Financial Services Zug IFZ, Lucerne University of Applied Sciences and Arts, Aug 2023
Tech infrastructure, wealth management among most prevalent offerings
Looking at the product offerings available in the market, the study found that over half of the companies surveyed (54%) provide technological infrastructure facilitating crypto investments for third parties, making it the most prevalent product. Specifically, 32% of the companies in the sample offer infrastructure services exclusively, whereas 9% facilitate infrastructure and direct investments.
After infrastructure, direct investment in crypto assets is the second most prevalent product in Switzerland and Liechtenstein with 45% of the surveyed companies offering access to cryptocurrencies such as bitcoin and ether.
Indirect financial products, on the other hands, such as exchange-traded products (ETPs) and open-end funds with crypto asset relevance, are offered less frequently in comparison. More precisely, 35% of the companies surveyed offer structured products, 27% offer funds, and 20% offer derivatives.
Product offerings of surveyed companies, Source: Crypto Assets Study 2023, Institute for Financial Services Zug IFZ, Lucerne University of Applied Sciences and Arts, Aug 2023
Besides product offerings, the study also looks at the services available in the market, revealing that asset and/or wealth management (45%) is the most prevalent service, followed by custody solutions (38%) and exchange services (37%).
Asset tokenization and issuance is offered by 33% of the companies surveyed, and brokerage services by 32%. The lending of crypto assets, by contrast, is less common, with only 15% of all companies offering corresponding services.
Service offerings of surveyed companies, Source: Crypto Assets Study 2023, Institute for Financial Services Zug IFZ, Lucerne University of Applied Sciences and Arts, Aug 2023
Crypto adoption on the rise despite slumping markets
The report notes that the growth of the crypto asset investment landscape in Switzerland and Liechtenstein has been driven by increased adoption of the emerging asset class.
A survey conducted by Statista polled 2,000+ Swiss residents and found that 21% of respondents owned or used crypto assets in 2023. The rate is double what was observed in 2019 during which just 10% of respondents indicated owning or using cryptocurrencies.
This showcases that adoption is rising quickly in Switzerland and at a faster pace than other locations, including Spain, the Netherlands and China, the data show. It also reveals that Switzerland is the 11th biggest adopter of cryptocurrencies in the world.
Share of respondents who indicated either owning or using crypto, Source: Statista Consumer Insights, Aug 2023
Despite rising adoption of cryptocurrencies, the IFZ report shows that crypto trading has declined substantially in Switzerland and Liechtenstein since its all-time highs of 2021.
In H1 2023, indirect investments in cryptocurrencies through ETPs and open-end funds amounted to CHF 2.9 billion, which represents a decline of 54% compared to CHF 6.1 billion in November 2021.
Total assets of ETPs and open-end funds, Source: Crypto Assets Study 2023, Institute for Financial Services Zug IFZ, Lucerne University of Applied Sciences and Arts, Aug 2023
As for direct investments through exchanges, the study found that an estimated total volume of CHF 2.1 billion was traded by Swiss investors on platforms such as Binance, Kraken and Bitrue in June 2023, representing a decline of nearly 90% compared to the monthly peak of CHF 19 billion recorded in May 2021.
Monthly spot trading volume on centralised crypto exchanges from Switzerland, Source: Crypto Assets Study 2023, Institute for Financial Services Zug IFZ, Lucerne University of Applied Sciences and Arts, Aug 2023
Switzerland has emerged into one of the largest and most advanced crypto hubs in the world. According to the Greater Zurich Area, the official investment promotion agency of the economic region of Zurich, the country hosts some 1,135 blockchain companies, among them unicorn startups and some of the world’s biggest cryptocurrencies such as Ethereum, Cardano and Tezos.
At the end of 2022, the top 50 blockchain entities in Switzerland and Liechtenstein collectively held a value of US$185 billion, accounting for 23% of the entire crypto market which was estimated at the time at US$798 billion.
Featured image credit: edited from freepik
