Authored by Matthew Allen via SwissInfo.ch,
The co-founders of Sygnum crypto bank have hailed the award of a Swiss banking license as a game changer that could open the floodgates to the integration of cryptocurrencies and other digital assets into the established financial sector.
Sygnumexternal link, along with SEBAexternal link, were awarded provisional banking and securities dealer licenses by Switzerland’s financial regulator on Monday. Both entities will become fully-fledged banks once they have completed some final routine regulatory hurdles.
“This is the first time such licenses have been granted worldwide, so Switzerland is playing a pioneering role,” Manuel Krieger, CEO of Sygnum Switzerland, told swissinfo.ch. He also thinks the early movers will encourage others to take the plunge. “We now have a responsibility as an enabling platform to help banks and other financial players make the step into the digital asset world.”
“This has positive implications for Switzerland and distributed ledger technology [the blockchain-style platform on which cryptocurrencies run] internationally,” added Mathias Imbach who runs the group’s Singapore operation.
“Cryptocurrencies will come out of the shadows if dealing with these assets can be done in a 100% compliant manner upholding all the rules that a strict regulator demands. That is a game changer,” he added.
image courtesy of CoinTelegraph
Global reputation
Switzerland has been one of the leading players in the global adoption of tokenised digital assets and DLT technology. For example, Switzerland is in the process of updating its financial legislation to incorporate the new technology.
It is one of the reasons that Facebook decided to house its Libra cryptocurrency foundation in Geneva. It’s also why established players, such as the Swiss stock exchange and state-owned telecoms giant Swisscom, are getting involved, along with a growing number of start-ups in Switzerland.
Until now, the crypto asset sector had failed to completely convince the Swiss Financial Market Supervisory Authority (FINMAexternal link) that it could safely and reliably integrate the worlds of crypto and mainstream finance.
Sygnum and SEBA have now proven this possible to the regulator’s satisfaction. Sygnum has even created its own digital payment token, backed by Swiss francs, which can be used to complete trades on its platform.
The benefits of tokenising all types of financial assets in a purely digital format and trading them on DLT ledgers are believed to be manifold. Bypassing intermediaries should make both trading and issuing company shares faster and cheaper. Instantaneous settlement would also eliminate the risk of trades going wrong while they wait a few days to complete.
Critical voices
“DLT has potential to make whole financial infrastructure more stable and robust,” said Krieger.
As with all new technologies untested on a large scale, there are doubters. Cryptocurrencies, such as bitcoin, have been banned in some countries as potential instruments for crime and money laundering. FINMA was clear in awarding the licenses that it expects both crypto banks to abide by anti-money laundering rulesexternal link.
The United States is leading a host of critical voices against Facebook’s Libra project, fearing it will snatch away control of the monetary system. Institutions like the Bank for International Settlements have also highlighted concerns about cryptocurrenciesexternal link.
Others worry that a “magical” digital book keeping system that does away with the need for accountants and banks to keep track of the money sounds too good to be true. At the very least, say detractors, it would collapse under the weight of multitudinous high-speed transactions conducted throughout the world every day.
But despite the doubters, Switzerland appears determined to keep ahead of the game. Part of the reason, as Imbach lays out, is the fear of falling behind international competitors.
“Other countries, like Liechtenstein and Luxembourg have also taken steps towards adopting DLT [although they have not yet licensed a dedicated crypto bank]. It is crucial for Switzerland to at least remain at par with them.”
Additionally, Sygnum is in talks with local regulators to seal a banking license in Singapore, Bloomberg reported on Aug. 28.
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