Offshore havens challenge Switzerland for swelling ICO funds

What does the Cayman islands have for ICOs that Switzerland lacks? Keystone

More initial coin offering (ICO) crowdfunding assets were generated in the first five months of this year than the accumulative total between 2013 and the end of 2017, a Swiss study reveals. Switzerland remains one of the global ICO hotspots despite the emergence of offshore rivals, say its authors.

Blockchain start-ups obtained some $13.7 billion (CHF13.6 billion) in ICO capital until the end of May this year, according to a report by audit firm PwC and the Zug-based Crypto Valley Association. This is nearly double the total of all other funds raised until the start of this year.

PwC/Crypto Valley

Companies raise start-up capital through this form of crowdfunding by selling digital tokens, which are either used on their blockchains or can be traded for profit, in exchange for cryptocurrencies. The ICO craze really took off in 2017, but volumes this year have reached a new dimension, led by giant fundraisers from the likes of EOS and Telegram.

Getting hold of precise numbers in the ICO market is not straightforward, as evidenced by differing estimations from various studies. The PwC/Crypto Valley report, issued on Friday, showed that the size of funds raised in Switzerland appears to be bucking the growth trend by stagnating.

Super ICOs move offshore

Swiss-based ICOs have generated $456 million so far this year compared to $1.46 billion in the whole of 2017. Last year Switzerland lay in second place behind the United States in the league table of ICO funds. But the alpine state now faces more competition from offshore havens (Cayman Islands and British Virgin Islands) and other jurisdictions that have caught on to the phenomenon.

PwC/Crypto Valley

However, co-author of the study Daniel Diemers from PwC says the bare figures do not tell the whole story. “Switzerland remains one of the most legitimate jurisdictions in the world to conduct an ICO,” he told swissinfo.ch. “It certainly does not want to compete with jurisdictions that have less stringent regulatory requirements.”

“The broader array of countries coming into the ICO scene is a positive trend,” he added.

League tables only make sense when viewed over the long-term with enough case studies to strip out one-off anomalies, according to Diemers. These outlying ICOs include the EOS crowdfund that is expected to end up with around $4 billion in a Cayman Islands based entity.

So far this year, Switzerland has yet to host the type of giant ICO that it saw in 2017. These included Tezos ($232 million) and Bancor ($153 million). The average amount raised by a Swiss-based ICO is $16 million so far this year compared to $44 million in 2017.