TBW Premium #25: The success of "Merge", our report from Switzerland...

TBW Premium #25: The success of "Merge", our report from Switzerland...

Read all about The Big Whale's 25th Premium newsletter.

Hello Whales and welcome to the little newcomers who have just joined us in the Premium edition.

We've got a special edition for you on Switzerland, where we spent just over a week!

To devour this week

🖊️ Editorial

🔥 Our exclusive news

🔍 id="">🔍 The Big Dossier

🤖 The focus of the week


A small step for crypto... A big step for Ethereum ⚡ ️

Mission accomplished 🚀

This morning, Ethereum successfully completed its "The Merge" update at 8:42am and has just moved to Proof-of-Stake.

This event is historic for two reasons. Firstly because it is a technological feat that will enable Ethereum to consume much less energy. Then because Merge opens up incredible prospects for the sector: the first change to the consensus algorithm on a massively used protocol shows that blockchains can undergo profound transformation.

Of course, they don't all have to: Bitcoin has evolved little since its inception. But the potential is there, and that's a huge step forward.

Speaking of progress, the Earth hasn't stopped spinning while Ethereum has been going through its big moult. As you know, we spent eight days in Switzerland where we met many of the players in the ecosystem (start-ups, investors, politicians).

Is Switzerland the much-vaunted crypto paradise? As usual, things are always more complicated.

Good dive 🐳



👉 "SBF", public enemy #1 on Wall Street

Sam Bankman-Fried shouts it loud and clear almost every day: his goal is to transform finance to make it "more accessible". For months, Wall Street bankers have watched the young boss of the FTX platform, half astonished and half amused, wondering just how far the man nicknamed "SBF" will go. Except that it seems that the atmosphere has since changed somewhat. "He's become a real target. The slightest misstep and they'll bring him down", according to an investor based between Europe and the United States. What is provoking the wrath of the golden boys? His arrogance. The billionaire already drew some criticism in 2021 after explaining that he would buy himself... Goldman Sachs, which is none other than one of Wall Street's leading banks! "Sam probably hasn't yet understood that traditional finance is still very powerful", adds the same source. And probably not ready to be swallowed.

👉 These crypto companies that are finding favour with banks

Opening a bank account remains an obstacle course for French crypto companies. But some seem to have fewer difficulties. These companies? Those that have obtained their registration as a Digital Asset Service Provider (DASP) with the Autorité des marchés financiers (AMF). According to our information, more and more banks are prepared to grant loans to companies with the PSAN label. There are currently around forty of them in France. "We were surprised to receive so many offers when we presented our project. We even had the luxury of rejecting some of them", says an astonished Nicolas Marchesse, co-founder of the Feel Mining investment platform and future payment service Wigl. Perhaps other players in the ecosystem could take a leaf out of their book.

Do you have any news?



At the heart of the Swiss crypto ecosystem

Where do I begin to tell you about Switzerland?

Perhaps with the most obvious: NO, and at the risk of disappointing some, Switzerland is not a crypto paradise.

  • Bitcoin is not the official currency
  • You can't pay in cryptos in all shops
  • Some banks refuse to open accounts for companies in the ecosystem

And we could go on with the list like this for a long time 😅.

On the other hand, Switzerland - population 9 million - is clearly one of the most welcoming countries, thanks in particular to its particularly attractive taxation on cryptos (There is no capital gains tax for individuals), as we were able to see during our report.

A brief (non-exhaustive) overview of the Swiss ecosystem.

👉 Geneva and its banks

Geneva, its banks, its water jet and... its crypto ecosystem. In just a few years, the "Protestant Rome" has managed to position itself as one of the cities in Switzerland and Europe where crypto and the banking world talk to each other the most. Many institutions, such as Julius Baer and the Arab Bank of Switzerland, are working with players in the sector and financing Web3 projects.

As for the larger institutions, such as UBS and Credit Suisse, they are still a little on the cautious side. "They're afraid of the reputational risk", a good connoisseur of the sector explained to us. We won't name names, but we were able to speak to several project promoters whose accounts with Credit Suisse have been closed. When was this? Last week...

In the meantime, things are moving forward in the canton (there are 26 cantons in Switzerland). One of the companies most emblematic of this "bridge" between traditional finance and crypto is undoubtedly Taurus. Founded in 2018, the company based a stone's throw from Lake Geneva has developed a platform for professionals to buy, sell and store digital assets.

Taurus, which now employs around 50 people, works with more than 20 financial institutions, such as French giant Crédit agricole via its subsidiary CACEIS. "We get a lot of enquiries," Lamine Brahimi, one of the co-founders of Taurus, told us.

Some people, however, also talk about "crypto-washing" when it comes to Geneva. "Here we are very good at communicating", explains a Swiss banker, adding, "But apart from a few projects, the canton of Geneva is still lagging behind the others". And particularly that of Lausanne...

👉 Lausanne and Tech

In Lausanne, the Swiss Federal Institute of Technology (EPFL) is an institution. Recognised as one of Europe's top-performing institutions, the EPFL, which hosts around 10,000 students on its campus, is a breeding ground for talent. With a wealth of funding.

This situation has obviously not escaped the attention of crypto players, who have gradually set up shop there to recruit the best engineers. This is particularly true of Metaco, which specialises in digital asset custody and works with several global financial heavyweights such as Citigroup, BNP Paribas and Société Générale...

Other companies such as the financial app Swissborg (find an interview with its boss below) and the YouHodler company have also set up shop on the shores of the lake to take advantage of this highly skilled workforce, as well as the canton's very pro-crypto policy. Not to mention the particularly pleasant living environment.

The canton is also home to Swissquote, the first Swiss bank to offer crypto purchases. That was in 2017! Based in Gland (35 km from Lausanne), it recently announced the launch of an exchange platform specialising in digital assets.

👉 Neuchâtel and its "maxi"

In Neuchâtel, everyone agrees on one thing: the city is experiencing a second youth. And cryptos are not to blame. In less than five years, "Neuch", which is emerging from two particularly complicated decades on the economic front, has created an ecosystem of around forty crypto start-ups, some of which have been created by foreigners (particularly the French).

Projects like Nym, Mt Pelerin or Bity have been attracted by the canton's tax policy, which has cut taxes sharply to attract investors. But that's not all. The town of 45,000 inhabitants has also managed to make a place for itself thanks to the Cantonal Bank of Neuchâtel, which very early on accepted crypto companies that couldn't find banks to go to.

One of the first people to set down their suitcases on the shores of Lake Neuchâtel was none other than Alexis Roussel. The co-founder of Bity, a platform for buying and selling cryptocurrencies originally from Geneva, arrived in Neuchâtel in 2015 after several failures at banks on Lake Geneva.

And others have followed. "We saw projects arrive as we went along," points out Didier Boillat, who is one of five members of the city's executive (there is no mayor in Switzerland) and in charge of digital. Some have criticised the bitcoin "maximalism" of the Neuchâtel community. "It's true that some people are very attached to bitcoin," notes Didier Boillat.

But in the opinion of many, things have eased off. "There are more and more projects," says Maud Bannwart, head of operations at Alephium, a protocol that, among other things, creates secure smart contracts.

👉 Zug and its tax system

In the crypto ecosystem, Zug has almost become a "mythical" town. Located 34 kilometres from Zurich, in eastern Switzerland, the town is essentially known for one thing: having hosted the Ethereum foundation in 2015, as well as several other big projects in crypto (Tezos in particular).

Since then, the town has developed in part thanks to this image as the "cradle" of the ecosystem, with several successes such as the "crypto-bank" Seba Bank. But some also explain that Zug attracts companies primarily for its particularly advantageous tax regime. It is less than 10% for companies...

We talked about all these subjects on Monday with Jérôme Bailly from Crypto Valley, which is the association that represents Zug and its crypto ecosystem.


The Discord interview with Jérôme Bailly (CryptoValley)

MDP : TBW2022


Cyrus Fazel: "Swissborg has nothing to do with players like Celsius"


The boss of investment firm Swissborg talks frankly about the market downturn, competition and his future products.

The Big Whale: How is Swissborg doing?

Cyrus Fazel: Everything's fine, but it's true that the crypto sector is going through a complicated period! In just a few months, players who were offering incredible returns thanks to decentralised finance protocols like Aave or Compound have collapsed. Some "magicians" like the Three Arrows Capital fund were offering rates of 20% thanks to very risky strategies, but at what price... They are now bankrupt. We have always chosen to be more cautious, which some clients may have criticised us for, but the situation is now proving us right.

How did you get through the spring crash?

To tell you that we weren't scared would be lying to you! A lot of articles at the time presented us as the next domino, the next player to fall. Some of our clients withdrew their funds, but a large proportion of them came back when they realised that everything was fine.

You still offered a return on the UST stablecoin just before it lost its indexation against the dollar...

That was a mistake, we shouldn't have listed it. However, I would like to make two things clear. The first is that we warned our users that it was very risky to invest in UST. The second is that we advised them to get out of UST before Terra collapsed. Some of them didn't listen to us... But that's nothing like what happened at companies like Celsius (read our investigation) or Voyager, where a large part of the funds disappeared.

Have you ever worked with these players?

No, never. We had initially planned to work with Celsius because we wanted to offer collateralised loans that these players made it possible to set up. But we soon realised that they weren't square enough. Swissborg worked a little with the American company Galaxy Digital until we realised that they were doing arbitrage with the GBTC. We then decided never to lend them money. Same thing with Celsius.

But the worst was still Three Arrows Capital because they really are "hedge funds guys". I know this environment well having worked in it for a few years. I'm very familiar with the extremely high level of risk that these structures are capable of taking.

What explains why Swissborg slipped through the cracks?

I think we had the right mindset and also a bit of luck (laughs). We've always wanted to protect our customers' accounts, while offering them the best decentralised finance services. It's not easy, but that's the mission we've set ourselves.

In contrast, players like Celsius take absolutely no account of their customers. They take 95% of the profits while leaving them crumbs. Celsius is a real black box. We have nothing to do with this kind of player.

The advantage of what has happened is that it will probably no longer be possible to have such players on the market. The regulators are going to demand a lot more transparency on the use of customer deposits.

How do you assure customers that you are not 'gambling' with their funds?

Customer funds are segregated. They are not mixed with those of the company. This is an obligation under Estonian regulations (where Swissborg is registered, editor's note).

The only way to use them is to do so with the agreement of our customers. To be clearer, we have designed our application as a kind of private blockchain. All your assets are linked to your identity and you are the only person authorised to move them. Only in a few extreme cases, such as the death of a client proven by a notary, can we touch funds without the user's agreement.

How does Swissborg differ from other crypto investment apps?

Mainly through the prices. A "Premium" user of Swissborg - who acquires and immobilises between 500 and 50,000 CHSB tokens, or between €90 and €9,000 - probably benefits from one of the best offers on the market.

You make it possible to buy cryptos and make a return on them. What new services are you planning to launch?

We've just released Earn to take advantage of returns based on different levels of risk. Until now we've offered low-risk strategies, but our users also wanted to be able to expose themselves a little more.

Now for USDC stablecoin, there are two options to choose from: one on Aave that gives 2.1% per year, and a riskier one on Stargate that offers 4.6%. Our application explains why one strategy is riskier than the other, the aim being to provide customers with as much information as possible. Taking risks is not a problem, but investors must do so with full knowledge of the facts.

During your ICO in 2017, you presented Swissborg as an asset manager "with a crypto sauce". Is this still the case?

We have always wanted to transpose private banking standards to crypto. Between now and the end of the year, we will be offering indexes that will allow one-click exposure to a basket of tokens based on various themes (layers 1, gaming, NFT, etc.). This is much more innovative than ETFs, which are very popular in traditional finance, because users will really have the tokens in their wallets, whereas with ETFs you don't really own the shares held by the fund manager. Our service will be dynamic: if a token appreciates strongly, the composition of the basket will be automatically rebalanced.

And over the longer term?

The aim is to have the necessary authorisations to offer tailor-made investment products to suit each customer: their budget, their risk appetite...

Are you planning to bring out a payment card?

I'm in favour of it, but I don't yet know when we'll be able to bring it out. There is still some doubt about the usefulness of a payment card for our customers. We've noticed that the cards that offer cashback are used a lot, while those that don't are used much less.

We have a token (CHSB, -75% over the last 12 months, editor's note) that we could use with a card. We're thinking internally about setting up the right system, but nothing has been decided yet.

What storage technology do you use?

We were initially using Curv's MPC technology, but PayPal terminated our contract after it was bought out. Since 2022, we have been working with Fireblocks, which is also an MPC solution.

Unlike its main competitors such as Taurus or Metaco, Fireblocks enables thousands of transactions to be processed in the cloud. During the bull market of 2020-2021, we recorded days with more than 50,000 transactions! Without this kind of solution, we would never have been able to keep up with the load.

Why not work with Ledger?

Ledger doesn't do MPC. But choosing between MPC and asset custody via hardware wallets like Ledger offers is like choosing between skiing and snowboarding... You're bound to take the snowboard! (laughs).

Do you think MPC is more secure?

MPC has been championed for fifteen years by the leading security specialists for one simple reason: there is no backdoor whereas there are in all other technologies. I love Ledger and I hope that one day we'll be able to work together, maybe even to come up with a hybrid solution that combines their know-how and MPC. But for the moment Fireblocks is way ahead of the game when it comes to managing decentralised finance...

How many customers do you have today?

We currently have around 700,000 users spread mainly between Switzerland, France and the UK. These customers represent just under €1 billion in outstandings. During the 2021 peak, we reached €2.2 billion!

What has PSAN registration in France brought you?

Swissborg may be Swiss at heart, but our ambition is to have a presence throughout Europe. Registration went very quickly. We had a very good relationship with the Autorité des marchés financiers (AMF). France has always been a very big market for us, so it was important to get this registration as quickly as possible.

You are quite well known in France. How do you explain this breakthrough?

Like me, several of the founders of Swissborg have both Swiss and... French nationality. So France is a natural market for us. We quickly created links with French influencers, like Owen Simonin (Hasheur on Youtube) or Sami from Journal du Coin, who have become our ambassadors in France... It was easy to deal with them, especially as there aren't really any influencers in Switzerland, maybe apart from Roger Federer, who I haven't managed to get (laughs) yet.

How would you describe the Swiss ecosystem?

Switzerland is a very complex country. It is one of the most democratically advanced states and a highly decentralised country. This has many advantages, but it also has disadvantages, especially for business... What is authorised in Lausanne is not necessarily authorised in Geneva, Fribourg or Neuchâtel.

And then there's the fact that there are several languages. Of course, big banks like UBS have managed to develop everywhere in the country, but it's taken them between 50 and 100 years! As it's very difficult to be available everywhere, businesses aimed at individuals are quite rare in Switzerland. We don't have this problem in France: if a product is available in Paris, it will be available everywhere else.

Why are you officially registered in Estonia?

Let's be clear: we always wanted to be in Switzerland. But we quickly realised that to be available in Europe, we needed to be registered in a European Union country. Hence the choice of Malta, followed by Estonia from 2021. And we're delighted with our choice because the country is really pro-crypto.

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