6 Voices from the Industry
In this section, we relay some of the main lessons learned when interviewing actors of the Zurich FinTech scene. Each one of their full interviews is available through a hyperlink.
6.1 Descartes Finance AG
Dr. Adriano Lucatelli is the CEO and co-founder of the digital-only asset management firm Descartes Finance AG, a leading robo-advisory firm in Switzerland. This firm belongs to the business area of Investment Management and is A.I.-based. View the full interview here
“Regulation should primarily try to prevent macroeconomic financial shocks, not regulate every single process in the financial industry.”
– Dr. Adriano Lucatelli
The newly introduced legislation (3.1) has come with higher requirements for operation and created significant barriers to entry for start-ups operating in wealth management. However, many WealthTechs135 are based on A.I., which should allow human bias in wealth management and allow wealth managers to focus on relationship building. As such, while these new regulations might be necessary for large institutional wealth managers, they do not improve processes or client protection for robo-advisory firms. On the contrary; these new requirements increase the cost of doing business, and divert means -that could have otherwise been invested- towards internal function.
In particular, FinSA increased compliance costs for the start-up Dr. Lucatelli firmly believes this does not contribute to increased client protection, but rather reduces the firm’s investment capital. The introduction of FinSA can be measured by opportunity cost: for the same amount spent on compliance yearly, Dr. Lucatelli affirms he could have hired one developer or salesperson. These increased costs have a direct negative effect on innovation: less money for R&D and, since firms must now be compliant to operate, higher barriers to entry for start-ups.
Finally, Dr. Lucatelli thinks having industry-specific incentives such as sandbox regimes is not helpful. He rather see overall regulation be loosened, and have the responsibility be shifted to the client base, instead of attempting to protect them at all costs.
6.2 House of Satoshi
Rino Borini is the Co-founder and CEO of Scarossa, an independent consulting and media company, and the House of Satoshi, the home of Bitcoin. He is also on the board of Descartes Finance AG, which gives him a perspective from both the DLT and WealthTech sides. View the full interview here
To Borini, the sandbox and “banking license lights” created by FINMA have the potential to foster innovation, but this potential is hindered by the time and resources that are required for startups to obtain their license before beginning their activity. This process should be accelerated and simplified.
Borini finds the Swiss DLT laws very modern and thinks they will foster technological development in the crypto economy. In his opinion, FINMA seems to deviate from its technology-neutral policy style by regulating DLT explicitly. This specific regulation sometimes reveals unfavourable conditions for FinTech, such as a withdrawal limit for crypto-currencies set at CHF 1’000. To him, this leads to the dampening of innovation, and he doubts Switzerland can rightfully fill the boots of “Blockchain Nation Switzerland”.
Borini views the future positively and thinks Switzerland has the potential to maintain a leading role internationally. Regulators should work closer to industries, and regulations should be updated more often to match the changing circumstances. FINMA should not try to push innovation on the industry, but rather allow for innovation to flourish by itself. FINMA also requires a power team of industry leaders, as well as a start-up community they are willing to actively listen when problems are identified.
6.3 Relai AG
Julian Liniger is the Co-Founder and CEO of Relai AG, Europe’s easiest Bitcoin Investment App. Relai is a bitcoin wallet management app, operating on DLT. View the full interview here
Liniger shared the fact that the generous laws surrounding DLT are what made Relai AG possible. According to him, the regulatory situation in Switzerland is more favourable than that in Europe, and he is able to operate Relai based in Switzerland but has a Europe-wide client base. In particular, Switzerland is known to have a comparatively slow legislative process, which Liniger appreciates. This gives the industry enough time to adjust to new incoming laws.
To Liniger, Switzerland is very innovation-friendly. He really appreciates the sandbox environment and the FinTech License that FinTech may benefit from.
Including robo-advisory firms.↩︎