Crypto projects prepare to battle for privacy in Switzerland

Switzerland has long been seen as a beacon of privacy where companies, organizations and wealthy people put down roots in an effort to avoid the prying eyes of the rest of the world. Joining this cohort are many Web3 projects, which also appreciate the Swiss government’s generally positive stance toward blockchain and digital assets.

The country’s reputation as a privacy haven has resulted in Switzerland becoming a hub for privacy projects establishing their foundations or development entities there, including Nym, Session and Hopr — joining traditional privacy software companies such as Proton and Threema.

Now, a proposed change to a Swiss surveillance ordinance is worrying these same projects, as it would spell a marked increase in the government’s user monitoring requirements. But the decentralized nature of crypto may offer a solution for those wishing to preserve their privacy in a climate of increasing surveillance.

Switzerland is a privacy haven — or maybe not

Switzerland has long been considered by many to have some of the world’s strongest privacy protections. As Proton, the company behind the encrypted Proton Mail email service, argued in a 2014 blog post titled “Why Switzerland?”, the Central European country offers several advantages: Companies are outside of the jurisdiction of the US and EU, the country is politically neutral, there are strong constitutional privacy protections, and there is established infrastructure.

Kee Jeffries, technical co-founder of decentralized private messaging app Session, recently told Cointelegraph’s The Agenda podcast that it was important to establish the foundation “in a country which has a long history of preserving people’s personal privacy and freedom of speech.”

However, all governments must ultimately balance citizen privacy and national security concerns. In Switzerland, surveillance is governed by the Ordinance on the Surveillance of Correspondence by Post and Telecommunications (OSCPT).

In January, the Swiss Federal Council proposed a revision to the OSCPT that would increase user monitoring requirements for telecommunications service providers and widen the definition of who meets these requirements to include services such as VPNs, social networks and messaging apps.

In short, as they are currently written, the changes would require service providers that serve at least 5,000 users to identify all users and willfully decrypt all communications that are not end-to-end encrypted.

Privacy projects fight back against surveillance

The move has been met with widespread backlash from the privacy community. Proton CEO Andy Yen has threatened to fight the government in court and potentially pull the company out of the country. Decentralized VPN provider Nym issued a public call to action for Swiss citizens to contact their representatives and oppose the action.

In a statement, Nym’s chief operating officer, Alexis Roussel, said the ordinance by the Federal Council “is destroying an entire sector,” adding:

“This ordinance directly endangers the people who use these services.”

Sebastian Bürgel, vice president of technology at Gnosis and founder of decentralized mixnet Hopr, echoed the concerns of Yen and Roussel, telling Cointelegraph the move would likely backfire.

“If the intent is to limit the privacy and anonymity that services such as Proton Mail, Proton VPN and Threema are providing, that will not change much because those entities will potentially leave Switzerland if that were to happen,” he said. “But again, the consequences will be borne by everyone out there and everyone who’s actually in Switzerland.”

Related: Keeping crypto cypherpunk protects users from censorship and corporatism — Gnosis VP

Meanwhile, Ronald Kogens, a legal partner at Swiss law firm MME who focuses on Web3 and fintech, told Cointelegraph that it’s unclear whether the Swiss Federal Council even has the authority to implement such changes. 

“In an ordinance, you cannot include any heavy rights or obligations which have a strong impact on individuals in Switzerland,” he shared, saying that the Federal Council is essentially an executive body and that laws must pass through parliament. 

“One question you could ask is, does the Federal Council have the power, based on the laws where it stated that they can enact an ordinance, the power to do this, what they’re doing now?”

Are Swiss crypto projects at risk?

The move by the Swiss Federal Council is damaging Switzerland’s privacy reputation, but decentralized technologies like blockchain networks may offer a lifeline. According to Kogens, truly decentralized projects should be exempt from the new surveillance requirements.

“In my opinion, most Web3 activities are not affected because […] the pure offering of software without running any infrastructure for the whole messaging or communication system is not covered by this,” he told Cointelegraph. “You have to have specific servers or clients that you operate that are an essential part of the communication or messaging service.”

Either way, the more decentralized a project is, the less any government can influence its operations. Take, for example, Tornado Cash, which has continued chugging along for years despite multiple developers being arrested and the US sanctioning its smart contracts at one point.

Nym CEO Harry Halpin told Cointelegraph in March that “in theory, we should be able to get run over with a car, and the network would keep operating.”

“Hopr, as an example of Web3 infrastructure, does not operate infrastructure, right?” said Bürgel. “Hopr Association is involved in software development and research and development, but we are not an operator of a network.”

The fact that the Hopr network is fully decentralized and anonymous means the Hopr Association could not actually give any information about its users to Switzerland, even if it were legally compelled.

“Individual node runners which are participating in it, or other third parties, cannot tell who is using the Hopr network to access any kind of web service. That is the explicit goal of what we are undertaking.”

The future of privacy in Switzerland

The Swiss Federal Council’s proposed changes to the OSCPT are still in the consultation phase, with the public encouraged to offer feedback on the proposal through May 6.

Kogens told Cointelegraph that the council will review the feedback, create a final report, and decide whether to adjust the proposal. “That happens quite a lot,” he said, “because in the end, it’s not in the interest of Switzerland to do something which harms the industry, as long as they still can fulfill their goal, which they have with this surveillance act.”

But even if the changes go through as written, there could be some positive knock-on effects for the crypto space. “It may be that the silver lining is that it will drive users to decentralized and privacy-facilitating solutions instead,” said Bürgel.

“It is clear to everyone that more surveillance is bad,” he added. “Every single individual understands that.”

“Taming the surveillance machinery is a goal of Web3. It’s not just about magic internet money. And yeah, I think we need more people working towards that.”

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