Conventional and crypto finance continue to merge

Swiss digital assets bank SEBA has rounded off a bumpy year with some festive cheer – announcing an extra CHF20 million in funding from both existing shareholders (including Julius Bär) and new investors.

As I reported earlier, SEBA had to rejig its board and management team following the departure of key personnel in recent months, including chairman Andreas Amschwand. But the company, one of two so-called crypto banks that received a license in Switzerland last year, is now talking of expansion into Abu Dhabi, Singapore, Europe and serving US institutional investors.

A year ago, SEBA said it would raise CHF100 million via a security token offering, but this plan appears to have been shelved for now as the bank talks about having all the capital it needs for growth. It also plans to create digital versions of shares issued in the series B round to list on digital asset exchanges next year.

The crypto-finance gravy train is now positively overflowing with conventional banks taking the plunge into digital assets – more often than not, using Switzerland as a sand box or at least tapping into Swiss expertise.

Spanish bank BBVA has announced bitcoin custody and trading services at its Swiss unit starting next year. Standard Chartered, which has a stake in Swiss cryptocurrency storage company Metaco, has launched its Zodia Custody solution together with Northern Trust.

Gazprom Bank and Arab Bank have already launched their cryptocurrency services in Switzerland, along with a smattering of Swiss banks, including transaction bank InCore that has regulatory approval to offer digital asset services to clients.

This is all providing a windfall for such Swiss crypto-finance service partners as Metaco, Taurus, Bitcoin Suisse and Avaloq.

In the meantime, fans of decentralised finance and the blockchain (an open-source, community “owned” version of distributed ledger technology, first spawned by bitcoin) are left scratching their heads in wonderment.

Is this the same banking sector that for years refused to open up accounts for blockchain start-ups in Switzerland?

Behind the grinding of teeth lies the fear that the established financial sector will hoover up the digital assets it likes the look of while sanitizing the cryptocurrency sector with a blanket of centralisation. All this disguised with a marketing message of revolutionising the financial world.

Decentralisation and regulation tend not to make happy bedfellows. Yet regulatory certainty is a stamp of approval that many investors seek before parting with their money. New Swiss laws governing DLT and digital assets will start to entre into force from the start of February.