Switzerland is a banking capital. But a Bitcoin capital?
Switzerland has long been home to some of the world’s biggest banks. Now it’s home to a major player in Bitcoin, the upstart digital currency.
Xapo, a sort of digital bank vault for Bitcoin, said Thursday that it’s moving its headquarters to the European banking capital for its “regulatory stability, international neutrality and its deep-seated tradition in global finance,” according to founder and CEO Wences Casares.
Following the emergence of Bitcoin, a number of companies have built “wallets” for people to store their digital currency. Xapo’s version is for longer-term storage, known as a vault, which lives in offline servers and are pitched as providing a more secure environment for storing big stashes of Bitcoin.
Xapo is moving its headquarters to Zurich from Palo Alto, Calif., citing customer privacy concerns. Previously, the company had moved its vaults to the alpine nation.
In moving, Xapo joins a number of other companies based outside the US such as Coinapult in Panama, and Bitcoin Deutshland GmbH in Germany. The once-popular and now-bankrupt exchange Mt. Gox was famously based in Japan.
Xapo’s affinity for Switzerland is based on the country’s regulations around financial privacy, friendliness to business, and its political independence and stability. In particular, it cited Switzerland’s Federal Act on Banks and Savings Banks (known as the Banking Law of 1934) as providing the kind of privacy protection its customers and potential customers say they want. Under that law, it is a criminal act for banks to reveal an account holder’s identity.
As a result, the country has become a destination for criminal activity and tax evaders. However, in 2013, the US Department of Justice successfully convinced 100 Swiss banks to cooperate with it by handing over information about US customers suspected of evading taxes.
But while most customers may benefit from the privacy law’s protections, a spokesperson for Xapo emphasized that the company will continue to verify users’ identities before opening new accounts and that it will report any suspicious activity.
In the US, the level of privacy is significantly lower. By law, US banks are required to file reports for any transaction over $10,000, including the account holder’s name, account number, address, and Social Security number.
BitLicense, a set of regulations for digital currencies proposed by New York state has made some Bitcoin companies and executives nervous. The New York Department of Financial Services’s Benjamin Lawsky is spearheading the initiative, which is expected to be finalized as soon as the end of the month.
As Fortune previously reported, BitLicense would regulate Bitcoin wallets and exchanges along with requiring companies that transmit digital currencies to get two different licenses in each state. Licensed companies would need to get approval for new rounds of funding from outside investors and may need to get approval for every new Bitcoin product they release.
Xapo, however, told Fortune that BitLicense had no bearing on the company’s decision to move to Switzerland. A spokesperson also added no other particular regulation affected the decision.
But in any case, Xapo’s move is telling of the industry’s feelings about regulation. Much of Bitcoin’s appeal — anonymity, efficiency, decentralized control — could easily evaporate in the face of regulation and discourage both businesses and users of the digital currency. On the other hand, regulation could tamp down on abuse and criminal activity.
(An earlier version of the story incorrectly spelled Wences Casares’s last name. It’s been updated with the correct spelling.)
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