The small Swiss town of Zug has long been known not only for its picturesque idyll and a respectable cherry cake, but also as the world capital for fans of Bitcoin and other crypto currencies. But what are companies looking for here in the deep valley?
The last few years have been tough for crypto fans. In November 2021, the scene celebrated Bitcoin’s all-time high of around $69,000. When the price then fell to $15,000, the joy quickly turned into a vale of tears. But no crisis lasts forever – and at the moment it looks like the bulls are coming back after the bears.
In January 2024, the US Securities and Exchange Commission released Bitcoin ETFs. Money is returning to cryptocurrencies, and enthusiasts who had not given up hope are celebrating the rising prices. In the canton of Zug in Switzerland, people are also happy that the crypto crisis has been overcome for the time being. Because there the engine of the global blockchain scene is running smoothly again. Between cherry pie and the mountain panorama, a place was established that became known across the country’s borders as “Crypto Valley”.
If you stroll from the small train station square in Zug to the Old Town to the Chapel of Our Lady, you will pass a few century-old half-timbered houses. Pedestrians only need 15 minutes to walk this one kilometer; away from the train station, the hamlet is deserted. A good 30,000 people live here. A feeling of an idyllic small town takes over, there is no sign of an innovative Crypto Valley.
Also worth mentioning: the cherry cake in question, whose tradition in Zug is proven to be 600 years old. Evidence that it is not the cake, but crypto that is the reason for the pulse of the times can be found in wine bars, at the tax office and even at ticket machines of the Swiss Federal Railways, where you can pay with Bitcoin everywhere. The service is not used often. The city administration had at least 50 invoices paid in Bitcoin by March 2023, the majority of which were due to curious journalists.
And this is where Crypto Valley is supposed to be? Anyone who asks passers-by about the crypto mecca in question has to repeat themselves several times and then often looks at questioning faces. “It must be back there somewhere,” I am told by a man in his mid-50s who is walking his dog on a leash while waving his outstretched arm in one direction. “But I can’t tell you exactly. I just heard about it.” And he’s gone.
If you’re looking for a highly polished building complex, you’ll look for it in vain like you would for a signpost. Crypto Valley is not a specific place. Rather, it is an ecosystem focused on blockchain technologies and consisting of universities, banks, venture capitalists, technology solution providers and law firms. It extends throughout Switzerland and the neighboring country of Liechtenstein. On the one hand, the world’s attention is often focused on Zug because the largest crypto companies set up their tents here.
On the other hand, because the Swiss bureaucracy issued licenses faster than almost any other country. In 2019, the world’s first crypto banks, Seba and Sygnum, received a banking license from the Financial Markets Authority (Finma). Crypto Valley Venture Capital publishes an annual report analyzing the top 50 blockchain projects across Crypto Valley. According to the 2023 report, a total of 1,290 companies with a good 5,766 employees have settled here.
66 in Liechtenstein, 289 in Zurich, 22 in Lucerne, 30 in Bern and 512 in Zug. 13 of them are considered unicorns, including the tokens Ethereum, Cardano, Celestia, Polkadot and Solana. Swiss crypto banks or the crypto broker Bitcoin Suisse are approaching the billion dollar mark. They are working on blockchain infrastructures, called protocols, or on applications that are built on these platforms.
It all started in 2014 with Johann Gevers, a Swiss entrepreneur, the founder and former CEO of Monetas. The company focuses on digital financial technologies and blockchain solutions. Gevers attracted the scene, including representatives from the Ethereum Foundation. They must have liked what they saw, because the foundation was among the first to settle in Zug. Suddenly the place had arrived in the hearts of the tech glitterati.
But then came the crypto crisis. In November 2022, the collapse of the American crypto exchange FTX, led by the “honorable” billionaire Sam Bankman-Fried, had a massive impact. When the transaction volume shrank and Bitcoin Suisse laid off 20 percent of its employees in one fell swoop, Crypto Valley was unpleasantly shaken awake. The price fluctuations didn’t matter much to most Zug companies because their primary concern is to further develop blockchain technology.
Zug was voted the world’s ultimate crypto hub in a vote by the industry publication “CoinDesk”. The evaluation criteria range from regulatory support to digital infrastructure to the question of whether the crypto community also finds enough quality of life.
Singapore, London, Seoul, Dubai and Abu Dhabi, which came in behind, are certainly applauding politely in the background, but are catching up. Zug’s grubby shell company image has largely been shaken off, and the canton is now said to be investing millions of francs into blockchain research. These include professorships that aim to research the blockchain potential for society.
And the city? Strives to be welcoming to the industry. The business contact point in the canton of Zug is the free “all-in-one service” for companies and newcomers from all sectors – a kind of Swiss contact army knife. Antonio Diaz, the deputy head of the Swiss authority, explains the advantages as follows: “Zug as a business location has grown in recent years and has become more international. We support business start-ups and provide assistance with approvals. And we connect you with the right service providers when you are looking for an office or moving. As a bonus, we promote networking by introducing companies to peer companies and community platforms.” This is what happiness sounds like for newcomers.
The Economics Directorate launched the Swiss Blockchain Federation (SBF). She wants to shape and promote laws and rules around the blockchain world. For such a small place, there are a surprising number of associations: Crypto Valley Association, Bitcoin Association, Blockchain Switzerland, Swiss Blockchain Federation and half a dozen more. Every June, the who’s who of the industry comes together at the Crypto Valley Conference to discuss the most important topics.
What else attracts companies to the small town? Answer: the general conditions. “Politicians think future-oriented and welcome new technologies. At the same time, privacy and trust are valuable assets,” says Oliver Bussmann, one of the best-known figures in the Swiss financial industry. Philipp Vonmoos is CFO of the Solana Foundation, which has around 100 employees in Zug.
Solana is one of the big players in the crypto space. Its own currency, SOL, rose from $21 to currently more than $120 in the past twelve months; its market capitalization is now $57 billion (as of March 6). Vonmoss explained at the conference last year what he appreciates about Zug, namely “the political stability and the expansion of research. Outsiders may see a standstill, but the industry is moving.”
For Bill Laboon, Director of Education and Governance Initiatives at the Web 3 Foundation, which has been based in Zug since 2017, the quality of life in the town is noticeable. “I can’t imagine living anywhere else. The big difference to other start-up places like Silicon Valley or Dubai is twofold – Zug is much smaller and focuses much more on a few industries. Networking is so easy. Recently I heard two mathematicians discussing Zug cryptography at the bakery.
My son can walk to school. Unlike many other start-up hubs, I feel like there is more consistency here. When you talk to people from other places, they often seem like they’re always on the move – they want to live in Dubai or Singapore for a while, make money and move on. While most people I know who have moved to Zug want to stay in Switzerland.” That’s high praise.
But there is another reason for its popularity. Zug is considered a tax haven. The profit tax rate for companies has also been continuously reduced, now it is only a meager twelve percent – which would make Zug number one in Switzerland in this respect too.
So everything is great in Crypto Valley? Not quite. In addition to the boundless optimism, there are questions about the security of integrating Swiss banks. Or about the ecological consequences of the relatively new technology. There is, for example, the high electricity consumption that is necessary in the production of digital currencies, or mining. And then we have to talk about a small but significant reputational risk, because Bitcoin and blockchain are also used for dubious transactions. The ugly words money laundering, drug trafficking and organized crime quickly come up.
Sure, in addition to chocolate, Switzerland is also known for banking secrecy. In fact, this was repealed in 2014, meaning the country lost an important locational advantage. Quite a few consider trading cryptocurrencies to be the new banking secrecy. To ensure that Zug doesn’t become a Crypto Crime Valley, the city council has to be careful.
Zug cannot rest because Liechtenstein also wants to become a crypto nation. The Crypto Country Association is already being formed in the small principality. And today it’s vying for the same clientele as Zug. The Zug example shows one thing: If the right framework conditions are offered, the companies will come – and with them the big money.
No matter which location – whether in Europe, Asia or the USA – ultimately prevails: everyone is struggling with a global problem that can affect the development and acceptance of blockchain and crypto. Alberto Diaz from the Business Contact Point in Zug points out:
“Geopolitics is very crucial. The war in Ukraine, the current developments between China and Taiwan, and the renewed formation of a bloc between the West and the Russia/China faction are cause for concern. The international economy is being weakened by the formation of new, large economic blocs. There is also an ongoing ‘de-risking strategy’. Others talk about ‘deglobalization’, which seems incorrect to me. The global value chain is under pressure. These questions will have a major impact on the coming years.”
No matter how the world develops, there will probably be unicorns in Zug for a very long time – the local baseball team has been called The Hünenberg Unicorns since 1988.
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The original for this article “Why a village in the middle of Europe has become a mecca for crypto disciples” comes from Business Punk.