Welcome To Crypto Valley

The Swiss town of Zug embraces digital currency. Some worry that the money might be a little too secret

- Hugo Miller

In May a devastating computer virus called WannaCry locked up the systems of carmakers, train operators, and even hospitals. The hackers demanded users pay to get their data back with the digital currency bitcoin. Some did, and when the cyber extortionists needed to swap tens of thousands of dollars worth of bitcoin in August, they turned to ShapeShift, a digital currency exchange based in the lakeside town of Zug, Switzerland.

Only part of the money was laundered before the transactions were spotted and shut down. ShapeShift declined to discuss the specifics of the case, but it said in a statement that it’s working with law enforcement and taking steps to ensure nothing similar happens again. Still, the event highlights one of the risks both Zug and Switzerland may face as the town tries to become a hub for the young cryptocurrency industry. Digital money could help the Swiss rebound from a decade-long assault on bank secrecy, but it also brings back questions about whether the country is luring illicit cash.

China cracked down on cryptocurrency exchanges in September, while the U.S. Securities and Exchange Commission said in July that sales of some new digital currencies would be subject to rules just as equities are. Switzerland’s more hands-off-approach has helped Zug attract more than 20 bitcoin asset managers, brokers, and digital currency exchanges. It’s also home to the Ethereum Foundation, the developer of an open source platform used for many newer digital currencies.