The Bitcoin is rising steadily in value and crypto- and blockchain-aficionados are full of optimism again. Despite the positive mood on display at their meeting in St. Moritz this week, a major breakthrough has yet to emerge that the industry could celebrate.

The spirit at Crypto Finance Conference (CFC), taking place for a fourth time this week, follows closely the curve of the Bitcoin. In early 2018, when a few crypto-enthusiast met for the first CFC at Suvretta House in St. Moritz, the hype resembled a craze: Bitcoin had exploded in value and had breached the $20,000 mark.

Blockchain startups were happy to pay almost any price to pitch their initial coin offerings (ICOs) to the two dozen billionaires assembled in the luxurious environment.

Not Without the Financial System

Half a year later, in San Francisco, the second CFC was a sobering experience. Bitcoin and the ICO business had collapsed. The third CFC in 2019 took place during the crypto-winter, with a sense of pessimism shrouding proceedings.

The conference participants for the first time seemed to take in that the revolution of the financial system couldn’t succeed without a regulatory framework provided by the financial system itself.

Crypto-Spring in St. Moritz

And today, Bitcoin is on the rise again. The cryptocurrency is driven by an appreciation that it can preserve assets and the perception of being as good as gold in times of uncertainty, especially in connection with the tensions that followed the deadly attack on the Iranian General Qassem Suleimani.

Gaining momentum was the dominant theme on day one of the conference, or put differently: the crypto-winter of last year is but a distant memory in this year’s springlike atmosphere in St. Moritz.

Crème de la Crème

Which partly is due to the concept of CFC: successful crypto-entrepreneurs and -experts want to convince and inspire investors present, hoping to get them onboard.

CFC organizers around CEO Nicolo Stoehr and Chairman Tobias Reichmuth managed to get a top-notch line-up to St. Moritz, with Young Sohn, president of Samsung Electronics, Eva Kaili, the key figure behind Blockchain regulation in the EU and Thomas Moser, crypto-expert at the Swiss National Bank (SNB) sharing the stage on Wednesday.

Billionaire Twins

The stars at this year's CFC are brothers Tyler and Cameron Winklevoss – theirs was a show that made plain just how much the industry currently is caught between delusion and reality.

The twins, who make a fortune on the basis of payment of $65 million from Facebook’s Mark Zuckerberg, invested in Bitcoin in 2012, aiming to hold 1 percent of the cryptocurrency. At the time of their investment, a Bitcoin was worth $8. If they have remained faithful to their strategy, they are worth $2 billion in Bitcoin today.

Breakthrough Imminent?

Cameron proclaimed that it wasn't earning huge amounts of money wasn’t what drove them, but the grand idea of a decentralized financial system and empowerment of people.

The two investors today work with State Street and Goldman Sachs via their exchange platform called Gemini. What the Winklevosses meant to say was that institutional investors were on the threshold to crypto finance with the breakthrough about to happen in 2020.

The mantra of the breakthrough about to happen is what keeps the crypto-community going. First, as the community strives to achieve its goal of a decentralized financial system and second, to one day being able to satisfy investors.

Evading Discussion

The crypto-community has become adept at evading discussion of an intrinsic contradiction: there is no way that crypto-finance can evolve without the help of the established financial system. In Switzerland – in finance, banking and the crypto-cluster between Zurich and Zug – this has become common knowledge.

Sygnum and Seba Cryto are the two crypto-banks already active in the industry, with Bitcoin Suisse due to follow later this year. The banking industry in Zurich has done its homework and invested in know-how, alliances and infrastructure. The basis is there for traditional banks to part in this crypto-business but the majority so far choses not to.

U.S. Regulatory Laggard

The reason for this is that for established banks and asset managers, volumes and profitability expectations don’t justify investing in the regulatory framework. The crypto-market simply is too small – the total volume of Bitcoin being $200 billion. Niklas Nikolajsen, the founder of Bitcoin Suisse, estimates that institutional investors will join the fray only once Bitcoin reaches a volume of $500 billion, which would allow it to become an asset class in its own right.

Also, Switzerland and Liechtenstein are exception in regulatory questions. Other jurisdictions, such as the world’s biggest financial market, the U.S., is years behind in terms of crypto- and Blockchain-regulation.

Institutionals Are Staying Away

A further aspect that has yet to develop is a fundamental sense of trust among consumers. Crypto-exchanges registered at least ten successful attacks from hackers last year. And too many accounts of lost crypto-assets are circulating, where the private keys had gone lost.

It is not surprising then that institutional investors – banks, pension funds, asset managers – by and large have stayed away from CFC. The conference has the feel of a family gathering of crypto- and Blockchain-entrepreneurs, -investors, -experts, -incubators and -aficionados.

The World's Leading Crypto-Ecosystem

It is a good thing that CFC has its roots in St. Moritz, because Switzerland has developed into the world’s leading crypto-ecosystem over the past two years. CFC has become an vital part of the Swiss crypto-ecosystem.