Mattia Rattaggi tells about the beginning of Crypto Valley

Transcript

My name is Mattia Rattaggi, I live in Zug since 26 years, I am an advisor in the crypto space or Web3 space since about ten years, and I'm totally dedicated to the development of projects in that area. My professional past is indeed in the banking sector, in the traditional banking sector because at that time, there was no crypto finance yet. So I spent most of my time at UBS group in different roles, senior roles, working for the C-level of the companies in the risk area, in the regulatory area,

also assisting the CEOs in dealing with multiple corporate events over the period from 1999 to 2016. I must say first that at UBS, I was very privileged because I happened to be active at the senior level during a period in which UBS experienced a lot of good and bad corporate episodes. We went from the very successful story until 2007 down to the problems experienced with the subprime crisis.

Following that what I call the “banking secrecy crisis” for Switzerland and then ending in the too-big-to-fail regulation that was negotiated and then implemented. This is an important background because on the one hand I learned enormously on the other hand it made me professionally a bit tired. The banking business became quite dominated by the straightjackets of compliance and regulation. This didn’t really match with my nature.

At the same time in parallel, as I was living in Zug, I could see what was going on here with this crypto movement. and this gathered my interest a lot. I decided to invest all my energies in assisting startup companies in becoming stable and successful in the Web3 space while at the same time giving my input, as far as I could, into the ecosystem, making sure that we were building something stable here in Switzerland with clear regulations and an open-minded ecosystem for entrepreneurs in this space to come in and develop their ideas in a successful manner.

I only get engaged emotionally and with all my energy in things that are really new. This is really important for me, the innovative part. If I look back, the first significant project was certainly the establishment of the world’s first crypto bank, then called Seba, now Amina, which was bringing to the market the first integrated financial services provider, integrating fiat and crypto in a way that still now doesn’t exist anywhere else, except in Switzerland for Sygnum, of course.

The second project was FiCAS AG and the fully-owned Bitcoin Capital AG. FiCAS AG is a manager of cryptocurrency investments, and Bitcoin Capital is an issuer of structured products backed by cryptocurrencies. There, the novelty was, that in 2019, we brought to the market the first actively managed ETP. ETPs are like ETFs, and they already existed in a passive way as passive investments, Bitcoin ETP, Ethereum ETP, and so on.

We brought to the market an ETP that could be actively managed in its components in a discretionary way, this was quite new. From there the company developed by issuing new ETPs, and also passive ETPs and also ETIs, which is a variation of an ETP. The following project that was very interesting for me was the tokenization of rare metals by the name of Edelcoin.

This was an achievement in the sense that we issued a payment token in Switzerland, an asset token as well, which, like Bitcoin, could be handled and traded everywhere. Owning one such coin would mean owning a portfolio of rare metals underpinning that coin. Rare metals that are not, still now, available in any other financial form, only in kind, and therefore, we brought to the market a new financial instrument.

After that I was asked to design and implement a foundation that would invest its capital only in Web3 projects that had to do with arts. Out of it emerged another very interesting project, Arts3 GmbH and also DCP, Decentralized Pictures. This is, in short, a Web3-based platform where artists can find resources for their movies, and it is also a platform that will distribute movies in a Web3-decentralized way.

Zug was not boring, Zug was always a very good place to live. It’s true that the cryptocurrency revolution brought a lot to the town. Not that the town transformed itself in the way it looks or in the way people behave in town, of course not. Also the institutions remained the same. But the spirit, I think, changed in a positive way. The crypto revolution brought Zug to the center of an international renomee. All of a sudden, Zug was known from Oakland to Anchorage.

This was certainly new for the town. I think a lot of people have been coming here not only for entrepreneurial reasons but also because they knew that here is where a lot of crypto began. Therefore it brought a lot of people with an innovative spirit, and this has had a ripple effect on the society living here in Zug. As a result, it not only remains a fantastic place to live but also a nice place to do business in an innovative way.

When I was at UBS, in late 2009 I did read the Satoshi paper, but I was so busy with corporate priorities that I put it aside. The first impression was the idea that I had read something revolutionary. And this was later confirmed. And by revolutionary, I really mean the core of it. The core of it is that for the first time in history someone had devised a way to transfer a digital property peer-to-peer in an economically valid way without needing something or someone in between attesting the transaction.

This was something where I said, “I don’t think that this existed before in human history.” And as we all know, we know where it went, right? In the team I was in and given my task, there was some reception and attention to it. Because this came out in the middle of the subprime crisis where the banks took a reputational hit.

It was noticed as a manifestation of a part of society that was really unhappy with the way the intermediaries were doing their job. In the time between 2013 to 2015, there were a lot of changes in the bank where I was working. Many people came and went, let’s put it like that. I understood that there was a clear market and a clear need of making a positive impact for this nascent industry of my expertise.

I found this very interesting, that I could use my work experience for the benefit of a new innovative industry. In my time it was rare because you needed some courage, maybe even some craziness to do that. Get out of the comfort zone and try out something different for a ten-times-better comfort zone later. I think I’m a guy like that, because I’ve always been on the innovative side.

I notice lately that many people watched the train, and when they got sufficient confirmation that the train is solidly under way then many people try to jump on the train, that’s a normal phenomenon. The ICO boom is a very important event in the history of crypto finance. I joined just before or at the boom, so to speak.

It has been very important from different perspectives. First of all, I think it was very important for Zug because the ICO boom came only because Ethereum was launched here. The ICO was a new way to collect money to fund projects, and it was very fast, very successful to the point that, obviously, it got the attention of the regulators and also of the politicians after a while, when it got a certain dimension, which then triggered the start of the regulation of crypto finance.

If we go back, we have a key event, at least here in the Crypto Valley by 2017, this means, the only place in the world we had one big ICO that collected in 15 days I think $230 million, this was the Tezos ICO. Obviously, this was an important event for a small place like Zug, and in general terms, a very successful fund raising. This was followed by many others.

And this raised the interest and the worry of the politicians and the regulators. I think the politicians were interested more from a reputational point of view because $230 million were collected basically in Bitcoin and Ether which at that time were absolutely unchecked from a KYC and AML point of view, without meaning by that there was something wrong, of course but it was just unchecked where this money came from.

I remember we as an industry took the first initiative to try to put some guidances and boundaries around the ICOs. I’m proud to say that together and also under the leadership of Luka Müller we established the first code of conduct for the ICOs, which was very welcome also by the financial regulators. This was a way to tell the community, “You can come to Zug, you have best-in-class infrastructure and regulation to establish your businesses, but follow certain rules.” What happened here by welcoming persons like Vitalik Buterin

has been a unique event globally. In no other country, no other municipality did this happen. It happened here, and as a consequence, all like-minded innovators across the globe, in Europe, the United States, or in Australia or anywhere else, they saw Zug as the place to go to realize their dreams, and it happened really like that. In 2017, you could walk around town and meet people from all over the place. This was the time the journalists from The Economist came here, from the Financial Times, I was even interviewed by Vanity Fair, can you imagine?

You could run into all kinds of people curious to ask, “Where is crypto, where does it take place?” This was a unique phenomenon, designed not to remain unique over the years, as we know, and certainly, we welcome that Zug has now been replicated in many other places because that’s where the technology should go, it should be embraced everywhere. This is important: We can never praise enough the attitude of the authorities in this country and in this specific canton and town.

Nowhere else has this crypto idea been welcomed like here. It doesn’t mean that here people are not risk-aware or that they would accept anything, this is not the case at all. The secret sauce of this place is that authorities have been curious and open and interested in something new. Yet from a background of being aware that stability, that systemic problems should be avoided, that consumers and investors should be protected, all this is the clear background of everyone around here.

But nevertheless, when things begin small and are new they deserve attention, and not prejudice. Coming from banking, I had quite a lot of expertise in regulatory issues in the financial area and also expertise in dealing with the regulators themselves. In 2017, when FINMA began to get interested in crypto finance and we as an industry as well wanted to promote better conditions

for the better integration of crypto finance and traditional finance, I took quite a prominent role in the working group of the Crypto Valley Association by taking position on legislative projects and by acting as an interface and sounding board to the regulators. And then, as an industry, we also took initiatives to promote better integration. I remember discussing with the Swiss Bankers Association by invitation by the federal authorities to put together ways to make banks more comfortable

in accepting and opening accounts for crypto businesses. The banks saw crypto in a negative way because at that time, crypto was still associated with illicit businesses. I understand the view. Why should a bank that makes a large majority of revenues with traditional businesses get involved in crypto for very little revenues but the big risk of tainting their reputation and then as a consequence losing a lot of business?

The attitude of banks needs to be understood under that light. Around October 2017, I reconnected with a dear friend and colleague of mine, Guido Bühler, here in Zug, and I remember that we met at one of the first CV Summits. He was telling me, “I feel a strong desire from clients that I have to invest and get exposure into cryptocurrency

but in a bankable and fully regulated way.” At that time, there was no way of doing that. We took it as a sign of the market that the market was telling us, “We need a regulated bank that would handle crypto, we need regulated rails for crypto.” And this was the beginning of the idea of establishing what would become the first crypto bank. I think, yes, that crypto banks like Amina and Sygnum were the bold catalysts of what then was to come,

is still going on and will go on for a while, meaning the seamless integration of crypto and fiat, which at the end of the day simply means the adoption of blockchain technology in finance, this is what it means. I think such a project like the cyrpto banks could only happen here in Switzerland, in Zug and in neighboring cantons, of course.

This was the place where crypto was mostly welcomed. There was already the beginning of expertise being built here. It was a place where the regulators had demonstrated to be very open in a constructive way towards this novelty. It is difficult to imagine how the crypto industry and the crypto finance industry in particular would look without Zug, without the Crypto Valley.

It is tautological to say that it would be different but the history has been such that for good reasons that we discussed Crypto Valley happened in Zug, and it developed further here in Zug and then reached out around the globe. Zug was the only and the first place where Ethereum was possible.

By making Ethereum possible, this has then led to the development of tokenization, the ICOs, all the derivatives and the possibility to make smart contracts in crypto. And Switzerland was the first country that provided regulatory clarity around crypto finance. What people should be aware of as well is that things don’t happen by magic, usually.

This is certainly the case for the Crypto Valley. Crypto Valley is the result of multiple factors but certainly it is the result of people being open to innovation while being aware of the potential risks that an innovation can carry. The Crypto Valley, as we see it now, after ten years, as an ecosystem that is solid, deep, deep, broad, and untainted.

There are no material scandals that happened in the Crypto Valley. This again is not magic. This is almost by design. Building out the Crypto Valley has been an interplay between openness, desire to innovate, curiosity, giving a chance to new things, coupled with an eye on the reputation of the whole system and an eye on avoiding undue risk concentrations. And this is to the credit of both the authorities and the industry players alike.

From the outside it may look like Zug got a lucky punch, it could have happened everywhere, but the comet landed in Zug, but I don’t think it makes sense. I think we should look for a real explanation around things, and certainly the Crypto Valley happened in the broader context of the town and the region here, even as a country that is accustomed to innovate because it derives its economic benefit from being innovative. There is a certain high level, a certain tradition in favoring innovation and looking for innovation, and providing the right setup for things to happen.

This is a profound explanation, and of course it tells you that it has to continue like that. The Crypto Valley that we see today will not be the Crypto Valley that will exist in 20 years. Surely not. It is not just the magic that will keep this region on top but it’s the will and the work of the people.

It will be important for the people here, from authorities to entrepreneurs, not to rest on their success but to watch out for new developments. 15 years ago, in Zug, there was no crypto. 20 years ago, there was no crypto anywhere at all. Everything was born in 2009 as we know. From that it’s easy to derive that in 20 years, there will be things that still have to be invented of which we have no clue.

We don’t have to forget the way we tackled this innovation in 2013, 2014, 2015, and be mindful that we should do the same with the new thing that will come. Of course things rarely happen like a comet out of the blue, so the signs of what will happen are already there, you need to read them. I hold the view that cryptography and cryptocurrency are one component that will get together with other components such as artificial intelligence and virtual realities

and will get integrated in what can be called the metaverse. This will be part of our daily life in the future. This movement will produce new opportunities for this region to stay on top if these innovative opportunities will be seen, attracted, and promoted in the same way it happened with crypto.

Very open and always with the view of doing something that is sustainable over time. I look back now nearly ten years with a lot of happiness and a smile because of two things. First of all, I got a lot of personal satisfaction and professional satisfaction in doing what I’ve done. Secondly, because I see a concrete impact of my actions in hopefully a good sense.

My impact has been twofold. First at the level of the significant projects that I contributed to realize, such as Amina, FiCAS, Bitcoin Capital, the foundation, and other projects. Secondly at the level of the economic and regulatory environment in characterizing the Crypto Valley by always trying to push the concept of openness for innovation but in an economically sustainable way.

This has been my mantra. I see that it has come into reality a lot.