‘Crypto Valley’ is what the small town of Zug in Switzerland has been dubbed in the high tech world. Just a half hour drive from the country’s largest city Zurich, it is now seen as a global hub for blockchain technology and cryptocurrencies. Investors have been flocking to this region of the Alps to get in on the action.

With its business friendly taxation scheme Zug has been seen as a global economic hub for many companies for years. And is now home to tens of thousands of them. They include pharmaceutical companies, commodity trading groups and large investment firms.

In recent years, however,  a new category of companies has arrived. “Crypto Valley” is the name given to an association set up in Zug in 2013 with the explicit aim of drawing startups dabbling in virtual currency technologies, creation and trading to the town.

It was in Switzerland, in Zurich, that the first bitcoin ATM was set up 4 years ago, while the Swiss national rail company has, since 2016, provided the possibility of purchasing the virtual currency at over 1,000 distributors across the country.

The setting up of the association worked. Zug is currently home to some 200 blockchain companies including the foundation behind ethereum, the second largest cryptocurrency after bitcoin. Out of the world’s six biggest Initial Coin Offerings (ICOs) – an unregulated means to raise funds for new cryptocurrency ventures – last year, four took place in Switzerland, according to Swiss financial watchdog Finma. The town has also since 2016 accepted bitcoin payments for council services.

The southern Italian-speaking Swiss town of Chiasso, which is attempting to compete with Zug as a “CryptoPolis”, has meanwhile decided to accept bitcoin payments for some taxes.

Blockchain technology allows for the development of peer-to-peer payment systems. It runs by recording transactions as “blocks” that are updated in real time on a digitised ledger that can be read from anywhere and does not have a central record keeper.

Switzerland is famous for its banking sector, which is divided in the face of the flood of new cryptocurrencies on the market. Some Swiss banks, however, were the first to get on board with cryptocurrency and the technology behind it.

Finma, the Swiss regulator, recently issued guidelines for the regulatory requirements pertaining to the “sharp increase” in the number of ICOs. Amid fears of money laundering the Regulator said, Creating transparency at this time is important given the dynamic market and the high level of demand.” It warned that it was particularly important to protect against money laundering, since the risk was high “in a decentralised blockchain-based system, in which assets can be transferred anonymously and without any regulated intermediaries.”

One expert said recently, “Forget for a moment about the value of the cryptocurrencies that you may or may not own. Instead of thinking of blockchains as investment bets or just cool technology, think of them as entirely new, and previously impossible, economic systems. Because that’s what they are.”

“Just like any economy, a blockchain requires that its designers define monetary policy (inflation), fiscal policy (block size), taxation (fees), voting (governance/upgrades), and provide for the common defence (securing the network).”

“Yet, unlike traditional economies, they offer the possibility of greater freedom and transparency because they avoid the problems of centralisation and concentration of power. That’s the good news. The bad news is that these new economies comes with extremely high risk. One of the risks, ironically, is also one of the technology’s greatest strengths.”

As Elad Verbin points out in his post on ‘Behavioural Crypto-Economics,’ “Blockchain systems are, by design, difficult to change once deployed.”