Blockchain heavyweights leverage Swiss start-ups for growth

Switzerland is anchoring the European and Middle East expansion of one of the world’s fastest growing cryptocurrency exchanges.

The Bermuda-based FTX group is building its regional headquarters on the foundations of a small, yet successful, Swiss company that was established just two years ago.

Like many projects I encounter in “Crypto Nation” Switzerland, Digital Assets came together in rapid time, surfing on the rising value of bitcoin.

From the office of his law firm in the eastern Swiss canton of Appenzell Outer Rhodes, Patrick Gruhn chanced upon the profitable cryptocurrency advisory business during the bitcoin boom in the middle of the last decade.

The law firm changed its name to Crypto Lawyers in 2018. Gruhn and his fellow crypto advocates then struck upon the idea of transforming company shares into digital “tokens” for a new era of blockchain trading.

And so Digital Assets was born in July 2020. It soon entered partnerships with FTX (which specialises in crypto derivatives) and the even bigger exchange, Binance – as were both exploring ways to create and trade a wider array of digital assets.

“A lot of people back then were claiming big things, but not many delivered,” Gruhn told me. “We ran our business for over a year without any hiccups and proved that tokenized company shares could work.”

FTX has now taken over the business, moving it to central Switzerland and retaining key staff, including Gruhn as head of the re-named FTX Europe.  

Gruhn plans to hire around 50 staff in Switzerland by the end of the year and wants to secure licenses to build a trading platform in the Alpine state. It already has permission to operate out of Cyprus through a partner investment firm.

“Our assumption is that in two or three years we would expect 35% of group trading volume to originate from Europe,” says Gruhn. Global trading at FTX Group has exploded over the last few months to reach a daily volume of some $14 billion. 

No sooner had the newly created European and Middle East Division of FTX been announced than it achieved a notable milestone. The award of a Virtual Asset Exchange and Clearing House license in Dubai has extended FTX’s reach into one of the world’s leading cryptocurrency hubs.

The United Arab Emirates are moving swiftly and ambitiously to capture a large slice of the global cryptocurrency and digital asset market.

Europe may prove a tougher nut to crack. Britain bans crypto derivatives trading among the general public. Quite a few crypto exchanges have tried, and failed, to enter the Swiss market. The financial regulator places heavy licensing demands on wannabe exchanges.

Gruhn’s company Digital Assets should not be confused with the US tech giant Digital Asset, which entered the Swiss market in 2016 by taking over the small Zurich-based company Elevence Digital Finance.

Elevence had developed a computer language for powering “smart contracts” – coding that automates transactions on distributed ledger technology systems.

That “Digital Asset Modeling Language” (DAML) is now an integral part of the Digital Asset success story and is utilized by the likes of the Australian and Hong Kong stock exchanges, Goldman Sachs and BNP Paribas.

It just goes to show that Crypto Nation Switzerland is not just about foundations and lawyers – it also plays a role in developing technology innovations.