Truly disrupting the Swiss bank model is SEBA Bank, a three-year old fully licensed Swiss bank, focused entirely on the cryptocurrency space.
Stefan Schwitter, Head of Investment Solutions at SEBA Bank explains that the firm set out to bridge the traditional finance world servicing the high-net-worth investor and family office with digital assets and cryptocurrencies.
The bank has five business areas: asset management; trading; lending; custody and tokenisation.
“We set out to build an end-to-end institutional grade offering in cryptocurrencies,” Schwitter says. “We do some other things that you would expect from a bank, such as providing clients with credit cards or cash point cards but the clients we bank are typically cryptocurrency clients who either want to trade or buy cryptocurrencies or crypto wealthy people who need a banking relationship.”
Schwitter says that their clients tend to fall into two groups, all within the business-to-business sphere, but either traditional asset managers and family offices who say they are building an allocation in cryptocurrencies and need education, and then a completely different segment of individuals who have become wealthy over the last few years because of cryptocurrencies.
These individuals have become wealthy through being paid in cryptocurrencies or they have been engineers who have been paid in bitcoin. These people are looking for a banking relationship to take care of their wealth and to help them diversify.
The custody part of the business is quite different from what you might expect from a Zug headquartered Swiss bank.
“It’s kind of abstract,” Schwitter says. “There’s no vault with gold bars in the basement or piles of bank notes but what you do have in the basement is a storage capability with a technical set up and as abstract as it is we are not holding the gold bars but the private keys of the coins on the blockchain.
“The private key is safe,” he says. “We are making sure because that is the weak spot in the chain.”
The bank has clients that are concerned about forgetting their passwords. “This is especially true if you are a wealthy individual or family office and have a large amount in cryptocurrencies – if you lose the private key, it’s gone forever, and this is the first and last thing people talk about when they talk to us. It’s abstract but super central.”
In the asset management business, the bank offers its own ETPs on bitcoin and Ethereum, including SEBAX, an award winning ETP based on the SEBA Crypto Asset Select Index, which is publicly listed on the SIX Swiss Exchange. SEBAX has a two-year live track record and has delivered twice the performance of bitcoin at the same level of risk, the bank says.
Schwitter comments that talking to other banks and asset managers, they all report that they are being bombarded by client requests for cryptocurrency products and they are looking for partners to work with.
“I think we can, at least for the next couple of years, extrapolate from what has been happening for the last two years, that cryptocurrencies will grow at a massive pace. What we are hearing from pension funds, banks and family offices is that many are not invested yet or not to the extent where they want to be, which could be 3-5 per cent of their total allocation, but they will do that next year.”