Crypto Valley's Sleeping Giants - Swiss Private Banks
Switzerland’s private banks pre-date the rise of Crypto Valley by about two hundred years -- slightly more if you consider the likes of Lombard Odier (1796) Pictet & Cie (1805).
On the surface, it would seem that these staid institutions, which made helpd make Switzerland famous for more than just chocolate and cheese, don’t seem to have much in common with the raft of blockchain and crypto finance companies that have populated the area from Lausanne to Liechtenstein.
Private banking is about as traditional as it comes; crypto is (depending on which flavor you prefer) is as untraditional as it can be.
One relies on carefully-curated personal relationships along with long-entrenched systems of doing business and generally despises change. The other offers a trustless network with relative anonymity and a whole new way of thinking.
Banks in Switzerland, in general, have been reluctant to play ball at all these new kids “on the block.” Many of the bigger ones still refuse to allow anyone remotely associated with crypto or blockchain to even open a bank account - a fact that many complain about.
Even the recent developments of the SIX Digital Exchange (SDX), heralded as a world-first, have so far failed to make the higher-ups on Paradeplatz change their minds.
Closed doors, willful ignorance and deaf ears - that’s about all anyone has been able to detect from within the ranks of the Swiss financial sector.
And yet…
The institutionals are coming
For the past year or more, the rallying cry among hardcore crypto asset investors has been “the institutionals are coming.” At the height of the crypto market in December 2017, this mantra was dearly held as a confirmation that the red-hot bull run would continue in perpetuity.
It didn’t.
Sure, some institutions have started to make individual moves here and there. Harvard’s endowment fund invested in a token sale. Fidelity’s various investment arms are also active in the space.
But what have we heard from Swiss private banks? So far...not a whole lot, which is a bit puzzling.
Of all the top-tier financial institutions, private banks in Switzerland are known for their single-minded focus on making money for their clients and (logically) should be interested in the rare opportunity to make double-digit returns in a world where interest rates almost always have a minus sign in front of them.
Are these giants, sitting in the very heart of Crypto Valley, just simply out to lunch - or too conservative to stomach bitcoin’s rollercoaster ride up and down the charts?
FOMO à la Suisse
While the risks involved in cryptocurrencies and digital assets for traditional banks are obvious - the risks of not being involved are also quite apparent.
High net-worth individuals are by and large a demanding customer segment and although they may or may not be technically literate, they do know a missed opportunity when they see one.
Many of them only just learned the basics of crypto finance and things like bitcoin during the wild rush of the last bull run.
Some of them missed out.
The smart ones know that it could happen again and they will not tolerate a second missed opportunity. If their bank doesn’t stand ready to support them - then it’s time to change banks.
There is also the question of competition for the next generation.
A good number of new millionaires and even billionaires were minted thanks to crypto’s rapid rise. Maybe a few of them come from wealthy families already and the private bank that has the infrastructure to satisfy the (conservative) risk appetite of dad or grandpa, also has a chance to secure the grandson or grand-daughter for the future.
Slumbering giants
What will it take to awaken the slumbering giants of Swiss private banking? Perhaps the better question is why do they appear so sleepily indifferent - if they are actually sleeping at all…
First and foremost, Swiss private bankers are held in high regard as staunch guardians of their clients’ money and assets - and creators of profits.
Risk is a bad word. Very much so.
As long as bitcoin and company display all the typical signs of a risky asset class, (publically) associating with them in any way would be tantamount to tarnishing a centuries-old reputation for prudence.
This is not the world of cheap PR stunts and splash-around marketing - something that Crypto Valley has, unfortunately, seen all too much of.
Two hundred year-old private banks don’t necessarily need PR. Keeping quiet is good enough.
Secondly, however, there are some signs that the sleeping giants aren’t actually sleeping. Like the beautifully serene swans gliding along Lake Zurich, it may well be that they are furiously paddling away underneath the surface - biding their time.
Julius Bär
The most openly active Swiss private bank in the crypto space is Julius Bär. The 125 year-old institution openly announced its investment in and support of SEBA Crypto AG - a startup crypto company aiming to receive a full banking license in Switzerland this year.
A former JB Board Member Andreas Amschwand left his position at the private bank to join the Board of SEBA.
It is safe to say that Julius Bär has a clear eye on the future - while still keeping a relatively low profile.
Vontobel
One of the biggest winners in terms of overall growth among Swiss private banks last year, Vontobel shows signs of being a bit more progressive than some in the Paradeplatz clan.
Most notably, it announced a move to offer crypto custody services, making tokens “bankable” in a certain sense of the word.
Whether the adventurous team there will push forward from this forward position remains to be seen.
Falcon Private Bank
On the smaller end of the scale, Falcon Private Bank has shown itself to be a rather forward-thinking institution with its early-2017 asset management approval from FINMA and the announcement of a crypto-to-fiat wallet earlier this year.
Despite its early leading position, Falcon may or may not be able to use its crypto position to grow significantly.
Pictet
And then there is Pictet.
The venerable giant of Geneva prides itself on respecting both the past and future equally. You might be forgiven for thinking that the former holds a bit more weight compared to the latter.
But there is a new man in town at Route des Acacias - and there are whispers that Boris Collardi may not actually be as negative on this new asset class as some may have previously thought.
Meanwhile, one of the crypto custody scene’s major players, Taurus Group (based in Geneva) recently added former Pictet WM CEO Christian Gellerstad to its Board of Directors.
Is it all pure chance? Maybe - or maybe not.
Conclusion
One thing is definitely not a turn of chance - Switzerland’s private banks have prospered over the centuries by clear design.
And in the process, they have become (overly) accustomed to doing things their own way. So far it has worked.
The odds are good that they will wake up just in time for their own benefit.