Blockchain has the potential to significantly reduce transaction costs and time, likely cutting into bank fees and commissions. In that scenario, Switzerland is most at risk since its massive banking industry generates half of its revenue from fees and commissions, according to ratings agency Moody’s Investor Service. Switzerland is also among the nations that are relatively sensitive to blockchain technology’s potential to drastically increase the efficiency of cross-border payments. Thus the blockchain technology underlying bitcoin, could hurt Swiss banks the most.
Blockchain technology eliminates the need for a third-party intermediary by quickly creating a permanent and secure record of transactions between two parties. Bitcoin is the first application of the technology, and many banks are exploring how blockchain can reduce cross-border payments processing time from days to seconds.
While making cross-border transactions faster and less expensive would be credit positive for banks, these efficiencies could also compress their fees and commissions, a credit negative
Known historically as a hub for international banking, Switzerland has also become one of the friendliest countries in the world to blockchain and digital currency enthusiasts. Its Zug region has already been dubbed as the “Crypto Valley” for a number of digital currency businesses located there. The nation’s financial markets regulator also approved the first Swiss private bank for bitcoin asset management, a move many saw as potentially paving the way for other global banks to do the same.