Dr Guenther Dobrauz
Partner & Leader PwC Legal Switzerland, Member of Global Legal Leadership Team At PwC

Show Notes

On the UK: “I’d rather have the people, the talent, the results of the investment in my territory than the pure issuing of tokens”

With a background in Law and Venture Capital, today’s guest Dr Guenther Dobrauz, member of PwC’s Global Legal Leadership Team, has strong belief in the ICO space, Switzerland as a thought-leader, and how regulation is key to getting this transformational ecosystem working to the benefit of all.

He believes that Switzerland is leading the world in ICOs, with its Crypto Valley Association backed by government and some of the biggest banking institutions in the world, because it combines good rules, globally-recognised regulators, and a working ecosystem that combines regulation, banking, advisors and talent, all available in a supportive space.

Financial services have traditionally developed lineally; but as exponential jumps happen in technology, so new business models emerge, opportunities are opened-up, and new players enter the arena. The old models aren’t cutting it – and the old rules are not keeping up.

He says we are very swift to criticise regulators, but we always underestimate how complicated it is, especially if you are up against a growing, sophisticated, detailed reality. The risk profile of ICO investment is higher than conventional investment. So when it comes to regulation, you need dynamic development to move with the technology.

Guenther believes Europe is a world thought-leader, with the EU creating a blockchain Fintech action plan at a national level. He also believes the UK – which has been a thought leader “in almost anything – ever!” – will take its place in leading this ecosystem.

You don’t always have to be the first mover: sometimes it’s better to be a fast follower. The UK is no speedboat when it comes to ICOs, but it’s no super-tanker either.

His final two points – if you are thinking about launching an ICO for your innovation, be objective. Research everything and compare the options to do that. And if you’re looking to support an ICO, treat is just like any other investment, do the same background due diligence. And use your grey matter!

These are exciting times, he says – as exciting as the rise of the internet – and blockchain is the second transformational coming in one lifetime. So let’s do amazing things together!

Key take-aways

  • This is a very young industry, in the process of growing up – but not there yet.
  • As the number of ICOs is increasing and the volume raised is growing, the quality is steadily improving, with real teams and real products, many already in the market and suitable for conventional venture capital input, if they wished
  • Switzerland stands out in Europe especially in terms of volumes raised compared with the country’s size.
  • The Swiss ICO ecosystem is well-developed, leading to it leading the world in this area, followed by other small countries such as Malta, Gibraltar, Lichtenstein and Estonia, and of course larger countries including the US, Singapore and the UK.
  • The Swiss ecosystem is suitable for ICOs as many other jurisdictions are trying to force this new way of raising funds into existing, strict or less-responsive regulatory systems - including the EU and the UK.
  • You need the whole ICO ecosystem to work – there’s no point having regulation if there are no banks, advisors or available talent.
  • Post-financial crisis the regulation was coming from a different angle, it was all about creating new rules to protect against what had led to the crash. Now we are seeing an openness, to allow fintech players to play.
  • In normal technology, you have a ‘thing’ created, and everyone piles in on it. In financial services the trigger point is not technology, but regulation.
  • The Swiss regulator has come up with a good principles-based, case-by-case framework since there are never two ICOs exactly the same, but one which also provides a kind of grid to define offerings: the system recognises payment tokens, utility tokens and asset tokens, sort of security tokens, with bond-type or dividend-based features.
  • Guenther has not seen that many new currencies spring up, and very few ‘true’ utility tokens. The reality is, most are hybrids with a utility element – under FINMAR you need to provide a utiity within a reasonable time, possibly only a couple of months, and many will fail this timescale.
  • 99.9% of opportunities via CF and ICOs are early-stage ventures.
  • The ICO is the one-off event, but the underlying technology is the most important part. That will be done where you find the talent, especially one street in the City of London – but Gunther has also found it in Scotland, in Ireland.
  • The domicile of the vehicle is not the most important part – almost all ICO-funded projects have some link to the UK.
  • There have been a few financial and political matters to distract in the UK over last couple of years, holding the ICO ecosystem back! But if you look behind the retail fund space, the asset managers making everything happen are mostly sitting in one street in the city of London.
  • Hedge funds may be launched in various islands across the world, but the people behind them are in the traditional places, New York, Boston, London, Amsterdam etc.

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