Finance 3.0 - Switzerland’s 5 Would-Be Crypto Banks
Switzerland’s Crypto Valley has a tenuous relationship with banks. Is it love-hate? Or more fear and loathing? The latest development in the ongoing see-saw is the growing number of crypto-focused financial services companies aiming to become full-fledged crypto banks.
Even though Switzerland’s traditional lenders have generally (at least openly) steered clear of crypto - and even though hard-core crypto enthusiasts might sneer at the goal of becoming a bank - Switzerland seems to have exactly the right environment to produce not just a single would-be crypto bank, but as many as four projects eager to be recognised as such.
How they will fare in their journey is still an open question. Switzerland’s financial regulator FINMA has said very little thus far - even though there is a clear push to be the first to claim the all-coveted banking license.
In the meantime, it is worthwhile taking a closer look at each one.
SEBA come out of stealth mode in September of 2018 with a bold announcement of its intention to seek a banking license. Since then, the June 2019 target date for receiving the much-coveted stamp of FINMA approval has come and gone.
SEBA Crypto’s CEO Guido Buehler is supremely confident in his vision to bridge the old and new world with a crypto finance company that holds a full banking license at the highest level. His dream of bringing crypto assets to mainstream banking may sound strange to some - but a lengthy career at UBS has apparently helped him convince a significant number of investors to sign on.
With approximately 100 million raised (and at least half committed to spend in the build-the-bank phase) SEBA has pushed ahead with strong ambitions, hiring over 60 staff in the meantime and making plans to move into the former Rathaus in downtown Zug when it goes live.
Like many of the aspiring new “banks” of Crypto Valley - SEBA professes a particular focus on wealth management and brokerage services plus facilitation of other crypto companies’ services - not so much on retail customers.
Bitcoin Suisse’s name is well-known in Crypto Valley - and around the world - to those “in the know.” It can legitimately claim to be the oldest company offering crypto financial services in Switzerland, having begun operations in 2013.
Until recently, Bitcoin Suisse had not openly declared its intention of seeking a banking license - although it was an open secret that with phenomenal growth (even during 2018’s bear market) and clients that include the Who’s-Who of crypto (Joe Lubin to name just one), that the company was the de facto “crypto bank” in Zug. According to information published together with the announcement of its banking application, Bitcoin Suisse raked in over $40 million of net revenue in 2018 with a cost/income ratio in excess of 30%.
Over the last year, the Bitcoin Suisse family of companies grew with the addition of Swiss Crypto Vault for storage and custody and Swiss Crypto Tokens, a fully fiat-backed stablecoin. By building individual, operational business units, the Bitcoin Suisse group has positioned itself as an established player to be reckoned with.
Whether its (relatively) long history eventually serves to boost its aim of becoming fully regulated or not remains to be seen.
On the surface, Crypto Finance AG does not fit in this list.
Despite being extremely active and visible in the space since its founding in 2017, CEO Jan Brzezek and team have made no open declarations about seeking a full banking license.
And yet - there are signs that it could move in the same direction.
For one thing, the company’s structure and business activities bear a remarkable resemblance to those of Bitcoin Suisse. The entire Crypto Finance group comprises three separate companies - Crypto Fund, Crypto Broker and Crypto Storage offering many of the same services as their counterparts at Grafenauweg.
For another - there is plenty of banking pedigree both in Crypto Finance’s management and Board of Directors: Raymond Baer (former President of Julius Baer Group), Philipp Cottier (formerly of Vontobel) and Jan Brzezek (UBS).
And finally, Crypto Finance (and more specifically its subsidiaries) have already been successful in winning a certain level of regulatory approval - with the first crypto asset management license in October 2018, in addition to the financial services approval it received earlier.
The path looks well-paved for the next step...
Arnoud Salamon and the team of Mt Pelerin could be excused for taking offense at the relative lack of coverage they receive in the crypto banking discussion.
However, according to their own description, the Mt Pelerin’s ambision is not to simply “become a bank,” but rather to leverage blockchain technology in new and innovative ways to expand and change the business models traditionally supported by banks. This includes a new core banking system built over the course of 3 years, which - if successful - would rival those of Avaloq and Temenos.
It just so happens that in the process regulations require that the company eventually become regulated as a bank in order to do what it wants to do.
The personnel behind Mt Pelerin does include several with banking roots from the likes of Pictet et Cie, Societe Generale and Barclays.
Unlike many others featured here, the company itself seeks little media attention while aiming to gain FINMA certification. It is an approach that, ironically, sounds a lot like a Swiss bank.
And speaking of silence...
The Sygnum project - a brainchild of renowned crypto lawyer Luka Mueller of MME - also employs the time-tested principal of Swiss secrecy to its operations and current status in the regulatory process.
Sygnum boasts plenty of heavy-hitting firepower, with a large amount of resources and name-status provided by national telecom Swisscom. Like Crypto Finance and Bitcoin Suisse, Sygnum figures into a group of solution providers focused on the range of elements required to build a banking ecosystem - custody (Custodigit), administrative services (Daura) and exchange (partnership with Deutsche Boerse).
A handful of mega-star names highlight the project - Phillip Hildebrand (former Chariman at the Swiss National Bank, currently VP at BlackRock) and Peter Wuffli (ex-CEO at UBS)
With such backing, it would seem that FINMA would have no choice but to hand out a license. At the same time, recent turmoil and unrest at Swisscom (and its subsidiary Swisscom Blockchain) has given sign that under the surface, there may be more than a comfortable level of turmoil.
Depending on how conservative or liberal the Swiss financial watchdog desires to be - the ranks of the Swiss banking world could soon become significantly bigger.
Questions of competition, competence and ultimately the level of desired disruption will weigh heavily in the next phase this story.
One thing is for sure - the slogan of “be your own bank” has not stopped the appetite and ambition of some to be a bank for others.