For the casual tourist to Zug, it would be hard to imagine this picturesque lakeside town in Switzerland as anything more than just that.

However, this small canton, just a short 40-minute drive from Zurich, is actually one of the hottest scenes for digital technology in the world today. Dubbed “Crypto Valley”, as in the Silicon Valley of cryptocurrencies, Zug has become a hotbed of innovation in blockchain technology.

Here you’ll find an entire ecosystem developing around blockchain businesses. The Ethereum foundation has been based here since 2014 and new companies are moving in every day. You can even take cash out from Bitcoin ATM machines on the streets and pay your restaurant bill in cryptocurrency.

But what is it exactly that has crypto-focused entrepreneurs flocking to Zug?

Even before the rise of cryptocurrencies, Zug had already been an attractive environment for entrepreneurs from around the world, and not just for the beautiful scenery.

Thanks to low corruption and clear legislation, Switzerland ranks as the number one country in the world for personal and economic freedom. Even within the country, Zug stands above the rest.

Due to the decentralized Swiss canton system, which gives each canton the power to establish its own laws, Zug has been able to create a complete tax and business-friendly oasis. Not only does the canton have some of the lowest taxes in the country, but companies have even been known to make special deals with the municipal government to reduce their tax bills further.

On top of that, both the local and federal governments are proactively trying to create a clear and welcoming regulatory environment for blockchain projects. That makes Zug stand out in an environment where other governments tend to treat anything in the space as illegal until proven otherwise.

In 2016, the Zug tax authority issued official guidelines for the accounting and tax treatment of Bitcoin. Meanwhile, the federal government declared Bitcoin to be a virtual currency, requiring no additional regulation.

Quickly after, the municipality of Zug became the first in the world to officially accept Bitcoin for the payment of government services. And by the next year, it had established a digital identity system built on Ethereum as part of its new ‘e-government’ initiatives.

Meanwhile, the SEC’s Swiss counterpart, the Financial Market Supervisory Authority (FINMA) made a commitment to encourage innovation and distributed-ledger technologies.

Given all of this, Zug is an ideal jurisdiction for a crypto-related business to be located. The business environment is great, the crypto environment is thriving, and it has an amazing location in the middle of the EU. The canton is safe, allows access to a highly qualified labor force, and it’s a beautiful place to live.

The only real negative to Zug is that it’s an expensive place. Living costs are exorbitantly high, with groceries and rent reportedly 40% more expensive than San Francisco. As might be expected, legal providers and accountants are also priced way above their US equivalents, adding significant costs to a business’ administration and operating expenses.

The bottom line is that Zug is an expensive jurisdiction to base a crypto-related business, but for many, it is worth paying the premium.

What does this mean for Crypto Law Insiders?

As we mentioned when reviewing Malta as a crypto jurisdiction, the most important thing for Insiders to keep in mind is that no matter how crypto-friendly a country can be, US laws and regulators will always have the last word.

Switzerland has always prided itself on privacy, especially in the financial sector. But over the last decade, we’ve seen how the US has been able to break Swiss banks and the concept of privacy in the country entirely. Ultimately, all countries are subject to the regulatory framework that the US creates.

But, as long as you are cognizant of this reality and are willing to pay the high price of living and operating there, Zug stands out as an excellent jurisdiction for its location, regulatory environment, and crypto entrepreneurial scene.

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