Johann Gevers speaks about the History of Crypto Valley

Transcript

My name is Johann Gevers. I'm an entrepreneur. I had founded my company in Vancouver. I was living in Vancouver in 2012 and soon after I founded my company I realized we need a good ecosystem. Our chances of success would be greatly improved if we were part of a good ecosystem. And the obvious choice would have been Silicon Valley but unfortunately the U.S. government was not very friendly to crypto technologies at the time.

So then I thought, "let's look for other parts in the world where there might be a good ecosystem," and there was some activity in a few places like Amsterdam and London. There was some in Japan, the Mt. Gox and a few other places. Finding a good crypto ecosystem When I looked into it there was no ecosystem anywhere. There were isolated companies or people interested and so I thought, "well then we need to build an ecosystem." And so then I started scouting for locations that

would be good for building an ecosystem like this. And I created a shortlist of potential places, and at the end of the day, Singapore and Switzerland were at the top of that shortlist. I actually traveled around the world to these different locations to see them in person because internet research only gets you that far. And I met with authorities also in different places to see what the conditions are like, the regulatory environment and so on.

And after doing this research I decided Switzerland was the best location. And so I was still based in Vancouver Canada at the time. And then in May 2013 I got in touch with the embassy in Vancouver, and they connected me to Switzerland Global Enterprise. Switzerland Global Enterprise is a public private partnership here in Switzerland that is focused on promoting Swiss business to the world and attracting other companies from overseas to Switzerland, so in both directions.

So in my case they were interested in us coming to Switzerland. And they interviewed me for quite a long time, about an hour, from the New York office. That was Caroline Blaser and her colleagues. And then on the basis of those interviews I created a project document, a word document, that summarized what we had and what we wanted to do. And this document was then shared with different cantons in Switzerland.

Actually they shared it with all the cantons. Re-inventing Switzerland as a financial center My marketing proposition to Switzerland Global Enterprise was that these new technologies, Bitcoin and other crypto technologies, held the potential to reinvent Switzerland as the financial center of the future. And the analogy that I used was the watch industry, the Swiss watch industry. Switzerland for centuries had the world's leading watch industry by far.

And then with the invention of digital watches in Japan, like Saiko and Casio, this put the watch industry under pressure, that's the story of the 1970s and the 1980s. And it was a big problem. And then Nicolas Hayek came up with the Swatch concept. And that saved the Swiss watch industry. They could reinvent themselves as the watch industry of the future, to still remain attractive and cool to the young generation with all these digital watches around. It was a success story.

And so I said we can do the same for the Swiss financial industry. The old model clearly would not be sustainable, it was already disappearing. But we could bring these new technologies and create Switzerland as the financial center of the future. So this really got their attention. Finding the right canton in Switzerland I came to Switzerland at the end of June 2013 and started a meeting.

I had a fully packed schedule that was set up by Switzerland Global Enterprise who I just have to say is a fantastic organization. They really open doors and connect you to people throughout Switzerland and make it much easier to set up. They connected us to accounting companies, to lawyers. They offered to introduce us to other startups like Google and whoever else that we wanted to meet.

And foreign companies that had settled here so that they could tell us first-hand what is it like to set up in Switzerland. So really a great service. And so they set up all these appointments, and I met with the different cantons, and it was quite an interesting experience. The cantons are really good at marketing themselves. And this shows the advantage of a decentralized competitive system with each canton trying to attract business and trying to be attractive through various different ways. And they all present themselves from the best side. So each time

that I met with a canton I would think, "wow, this is clearly where we have to do this." I met with Zurich and they told us all the great advantages of Zurich, the fantastic universities, the infrastructure, etc. And then I went to Lucerne. They said, "we have all these different advantages, and we also have the lowest business taxes in Switzerland." And I went to Schaffhausen and they showed us the beautiful downtown, the old town of Schaffhausen which is just charming, treated us to a very nice lunch and they said, "we will offer you 10 years of tax holiday.

So no business taxes for 10 years." I thought, "Wow, okay, that's pretty good." And the same in Schwyz, very low taxes and some other advantages. Meeting with Zug Then I came to the canton of Zug and met with Guido Bulgheroni at the Zug economic promotion office. And that was a unique experience compared to the other cantons. The other cantons all tried to tell all their advantages and special

deals and offers that they would do for us. And Guido Bulgheroni said, "We don't do any special deals." He just said this with a dry face, you know like, "We're not going to do anything special for you." And that worked on me and what he said is, "We are already so good. In other words our standard conditions are so good that we don't need to offer any special sweeteners."

And he also said something interesting to me. He said, "Lucerne might have the lowest business taxes at the moment. But first of all the personal taxes aren't that low, a lot higher than Zug. And if you are going to be there not just as a letter box company but a real company with employees and office etc., those employees have to pay taxes, so you've got to look at the whole picture. And secondly Lucerne doesn't have a very strong financial position." So this is ten

years ago. And he said, "Their low taxes, business taxes, will not be sustainable. They will be forced to raise them." And now with ten years hindsight, this is exactly what happened. And he said, "Zug has such good conditions and is stable and has a lot of money in the bank." At that time it was about a billion Swiss francs which is about a billion dollars, which is also the case now. And he said, "We can sustain the policies that we have. So this is not just for now or a few years. This will be like that in the future." So that impressed me.

And the other thing why I didn't go to Schaffhausen with a ten-year tax holiday and so on, is personally, I take a long-term view. And I wasn't just looking at this for my company. I was also looking at this for me personally. I had lived in a few different places in the world. And I had experienced how hard it is to integrate yourself. It takes a lot of work, years of work. And of course some expats choose not to do that.

But then you don't really feel like you're part of the community. And when I did my research, I said to myself, "This is going to be the last move that I'm going to make. And so I need to choose carefully, the business aspects as well as the personal aspects. The whole package has to work." And so I chose Switzerland for good. And when I was looking at cantons, I also wanted to choose the canton for good. I didn't want to be in Schaffhausen for ten years and then see what's the next cheapest tax after ten years and then move again, and then maybe go to Ireland or some other

tax haven. That's disruptive to the company. And it's just not the way I think. I want to be part of the community. And happily pay taxes in an environment where you can actually see that those taxes are used well. And it's used to produce great infrastructure, a good education system, etc. So that's why we chose Zug. And I'll mention one other point for why I chose Zug. When he said, "We don't do special deals." That clinched the deal for me, just that one thing. Because other than me founding this crypto company, my lifelong interest has been in ecosystems, healthy ecosystems.

So whole societies, which is also incidentally what my new startup is about. But so I was always looking at the whole ecosystem. And in those studies over the years, the factor that I identified that was most responsible for causing the downfall of social systems and societies was special deals for special interests. So when Zug said, "We have the same conditions for everybody. No special deals for special interests."

I thought, "Wow, this is my philosophy. This is the kind of canton I want to be in and support." Choosing Zug and moving there: The beginning of Crypto Valley Yeah, so we decided to use Zug. When I say we, that was me, my company. And so we chose Zug, that was in early July 2013. And then I created a marketing document in which I summarized the research that I've done, which had started some months before that and continued with Switzerland Global Enterprise and so on. And I basically summarized

all the advantages of first of all Switzerland and secondly Zug, and why we as a company had chosen Zug to be in, and why we would like other companies to come here as well so that we could create an ecosystem and not just be one company. You get all the synergies when you are a whole ecosystem, just like Silicon Valley. So the beginning of Crypto Valley was in July 2013. First glimpses of Crypto Valley So yeah, I mean, I think the process

is similar to when you have a big steam roller, a big heavy thing that you're trying to get moving. In the beginning, you're pushing and pushing and pushing and it seems like it just doesn't budge. Nothing's happening. And once you persist, eventually you start to get it rolling, and then it gradually starts picking up momentum, and then it gets easier and easier to get other people to start helping you to push. And eventually it gets so much momentum that it's almost like it's self-sustaining and it becomes hard to stop.

So that's essentially how this worked as well in the beginning. Actually we got moving surprisingly quickly but that didn't happen by accident. It was through clear strategy and an enormous amount of work and also relationships like I'd mentioned. I had mentioned Switzerland Global Enterprise. They made lots of very valuable introductions, and then the Zug Economic Promotion Office also made valuable introductions.

And then those started to get their own momentum through talking with different people and building relationships and so on. The whole thing started going. Key developments in Crypto Valley I can mention a few key developments along the way So right in July, basically almost immediately, when I arrived here, I was here for a day or two and then I left on the second of July to a conference in London, a Bitcoin conference. And there was a panel there that included Luzius Meisser, who is now the chairman of Bitcoin Suisse.

And I enjoyed what he was saying. And so after the panel, we started speaking. And I heard that he's from Switzerland and I said, "Oh, well, that's great. I've just moved to Switzerland. So let's keep in touch and see if we can help each other." And so we started talking and Luzius had the idea of creating an association that would promote Bitcoin, in other words, the Bitcoin Association of Switzerland. And he said: "Shall we do this together?" And I said, "Yeah, absolutely." And so the two of us founded

the Bitcoin Association Switzerland in October 2013. So a few months after we met, and we got a lawyer who created the entity for us and so on. And so we set that up and started having Bitcoin meetings. These meetups were happening in Zurich and the first one was in October 2013. And that's where I met Niklas Nikolajsen. And Niklas had come here independently. So I had come here, and he had come here, independently of each other.

He had actually come to Switzerland in 2011, working for Credit Suisse in their IT department. But he was a Bitcoin fan early on. And he was thinking about how he could help Bitcoin along and maybe start a business in this direction. And then in August 2013, he created Bitcoin Suisse. He incorporated Bitcoin Suisse here in the canton of Zug. So he and I both came to the canton of Zug, which tells you that this was a good jurisdiction to be in.

So the very first time I met Niklas, he looked the same way he looks now. He dressed the same way, with his long ponytail and his suit. Quite a character from day one. So that has stayed consistent right through time. Crypto Valley Association: Coordinated Marketing I had created a company in June 2014 called Crypto Valley GmbH. Crypto Valley Limited.

And I used that company to also register the Crypto Valley trademark internationally to protect it so that we could make sure it's used for the ecosystem. But I was so busy with my own company and also a regulatory association and meeting a lot of people to help them come here and so on, that I didn't have additional time to really build that company up. So instead of doing that myself, we talked about what we could do as an industry to coordinate the marketing and build the ecosystem further. And the credit there goes to Thomas Ankenbrand at the University of Lucerne.

He took the initiative in July 2016. He reached out to a few people said, "Let's meet and see what we can do." And so we decided, "Yes, this is the right time now to do this." And so I used my marketing people inside my own company and we created a website together with Vasily Suvorov. So Vasily and me worked together on that. And by the end of the year, we had a website.

I had registered a number of domains. And it took a number of meetings to decide who would make sense to have in that association as the board. And by the end of the year, we had everybody together. And in January 2017, we officially, legally, created the association. So that was the Crypto Valley Association that was born in January 2017.

And that was an important further step. So each one of these things helped to build the momentum. And that has grown. I mean, they are doing well. They've created a number of important things, including the Crypto Valley Conference that happens once a year. So I think in 2017, you can really say that the ecosystem had matured to the point that it was self-sustaining. Setbacks to the global crypto ecosystem Let me also say that the regulatory

environment isn't clear internationally. So this is a big threat. In Switzerland, it's been clear for a long time, for several years, Liechtenstein as well. And there's a few other places where it's clear, like Singapore, that have created an attractive environment. But the United States has been very, very difficult. There are so many vested interests there that are trying to destroy Crypto. And they've done a lot of damage. It's done a lot of damage. It's held the international ecosystem back. But I'm positive that we will

succeed. And this is not just a positive hope. This is based on history. Superior technologies always win. Economics always win. So in the short term, you can have political setbacks. But in the long term, the best technology, the best economics, always win. It's just a law of nature.

And it makes sense. So these are temporary setbacks. And we just recently heard that the courts dealt a blow to the SEC, regarding the first Bitcoin ETF. And Bitcoin's price is up quite dramatically recently. So I think this is where things start turning around. It's not going to be overnight. It's still going to be a long road.

But I'm very, very sure that we will succeed. Outloook for Crypto Valley I'm very positive for Crypto Valley. But while I am positive, nothing happens by itself. You always need people that drive things forward. I have not been active myself in Crypto Valley for several years. I've started focusing on a new project, which I cannot talk about yet but that I'm very excited about.

But there are other people that have been very active and very successful. CV Labs with Matthias Ruch and Ralf Glabischnig and their teams have done a lot of good work here in Crypto Valley. They are essential to the ecosystem. And they've gone further. I met with them a few years ago, and I made a strong case for why we need to expand internationally if we want to succeed locally. And basically, my argument is, if it's only one ecosystem, like here, Crypto Valley Switzerland,

then you are very vulnerable. It's like any single point of failure. And if it's only one successful ecosystem, then you're going to generate envy from the rest of the world. Just like Switzerland as a financial center generated envy. And they eventually tried to squash it with abolishing banking secrecy etc. So in the ethos of being decentralized, which we have in this industry, which incidentally is a key reason that I chose Switzerland as a center, because this system is so decentralized. So I made the case that we should create additional Crypto Valleys in other locations around the world,

including in the major economies, like in the United States and in the UK and in China. Because it's only if they see the benefits locally that they will not have an interest in squashing the industry. And then even if somebody should try to squash the industry, they would have 20 or 30 Crypto vValleys to squash instead of just one, this makes it much more difficult.

So I'm very happy to see that is exactly what is happening. Ralf Glabischnig, especially, has been active in Dubai. He's built up the Crypto Oasis in Dubai, which is successful. It's got lots of companies, and they're really moving ahead. And CV Labs with Matthias Ruch, they have set up additional centers in Cape Town, in South Africa, in Berlin, in Germany, in Tel Aviv, Israel, in Portugal, and there will probably be additional ones going forward. So this is exactly what is needed. So one needs to think big picture, instead of just thinking short-term and selfishly,

like we want to get all the benefits for ourselves here, one's got to look at the big picture and say, "Let's create lots of different centers, and let them help each other." And that's what's happening, and that also makes me positive that this is here to stay. Crypto is here to stay. Is Crypto Valley a success? Absolutely. I actually think it's an astonishing success When one is doing it at the time, then it seems slow, but when you look back and you compare with other stories like this in history. I mean,

Silicon Valley took decades to develop, decades. And the reason it took so long is because there wasn't a driver pushing it. It just kind of spontaneously happened. One company set up, like Hewlett Packard was a key company, and then later, another company set up. So just a number of companies set up and then it gradually started developing into an ecosystem. But if you want to move more quickly, you need somebody who is consciously driving it, who's got a concept and is driving it, and so me developing that

concept in 2013 and really driving it actively through clear strategy helped us to get there much faster. So July 2013, we had zero. There was nothing here, nothing. And within five years, we built into a world-leading ecosystem. That is just astonishing. It's absolutely amazing. Now it's ten years later. It's 2023. And we've got over a thousand companies. We've got over 5,000 jobs. It's actually over 6,000.

And if you look at the market capitalization of all the companies that are based here, and right now we're in a bear market, so all the valuations are down. But even with these down valuations, this is over a hundred billion dollars, way over that. And at the market peak, it was somewhere around a trillion US dollars. So I mean, to do that, and so at the market peak, that was just a couple of years ago also. So in the space of less than ten years, it was about seven or eight years, to have over a thousand companies, many thousands of jobs, and market value of around a trillion dollars.

That is just an astonishing success. And it certainly made the canton of Zug successful. In other words, it's been a contributor to the economic success in recent years. They have been amazed at the amount of tax revenues they've generated. Above normal, the number of companies that are created here, even today, the jobs, the tax revenues.

So it's an important contributor to the canton of Zug, which is the most successful canton in all of Switzerland. So yeah, I definitely think it's a success story.