Share
FacebookFacebook icon TwitterTwitter icon LinkedInLinkedIn icon Email

Finance

Cryptocurrencies are going institutional

Published 20 July 2021 in Finance • 7 min read

 

It’s not just retail traders that are dabbling in bitcoin and other digital assets, traditional money managers, looking for alpha and an inflation hedge, are getting in on the act too.

SEBA is the world’s first regulated cryptocurrency bank. The start-up received a traditional banking and securities dealer license from FINMA, the Swiss financial regulator, in 2019. The company was setup by former UBS bankers to bridge the crypto and fiat money worlds. Guido Buehler, the CEO, is the previous head of asset servicing at UBS Wealth Management.

SEBA Bank offers a wide range of custody, trading, investment management and financing services for institutions and professional investors. The tokenization of investment products, real assets, rights and primary financing is another focus area for the company.

The winner of the Aite Group’s 2021 Impact Innovation Award in Digital Wealth Management for digital startup of the year has emerged as regulators have started to clamp down on the lightly regulated crypto market, to build in safeguards and to address anti-money laundering concerns.

Prices, hard to predict in this dynamic market, have fallen in recent weeks following regulatory crackdowns and comments from Elon Musk. The Tesla chief executive reversed plans to accept bitcoin as payment for his electric motors, though he later reaffirmed support for the asset.

Nevertheless, SEBA Bank’s CEO Buehler tells IMD graduate Matteo Conti and MBA candidate Aksinia Stavskaya below that institutional investors and corporations are warming to bitcoin and other digital assets.

If you’re a leader of a company and you don’t believe in bitcoin or don’t like blockchain, the board is going to demote you.

The digital asset space has historically been driven by retail investors. Are you now experiencing a growth in demand from institutional investors?

Since the price of bitcoin went above $20,000 last year, there is significant interest from institutional investors. The proof of concept psychologically is there. People want to protect themselves against inflation with crypto currencies, not just with gold.

Banks, asset managers, hedge funds and family offices want a safe and secure environment [in which to access the crypto world]. They want to be fully compliant with regulation. That is our main value proposition.

We see a lot of interest from corporates that are saying they’re going to use [crypto] as the currency of their balance sheet. Tesla and MicroStrategy [are holding bitcoins in their treasuries]. If you’re a leader of a company and you don’t believe in bitcoin or don’t like blockchain, the board is going to demote you.

Do you foresee a time when governments could enter this space?

We are working with the Bank of France to experiment with CBDC [central bank digital currency] in Europe. But could a national bank put some of their reserves into crypto? It’s a very tough call. People need time to feel comfortable with crypto or see bitcoin as being in competition with their national currency. It’s about confidence and trust. My strong belief is it’s not one or the other, [it’s both].

How are you able to offer positive interest rates when the Swiss National Bank has set a six-year-long policy of negative interest rates?  

If you open an account with a 35-day notice period, we lend this money out as an asset in the digital world. And that’s why we can pay these interest rates [to savers]. We could pay even more and still make money. But in Switzerland, it’s a bit too aggressive. Being a new bank, with a new asset class, with a new offering — it would be too much.

SEBA Bank recently listed a suite of digital-asset exchange traded products (ETPs) on the SIX Swiss Exchange. Could these ETPs attract more investments in to the digital asset space?

The ETPs basically give traditional investors easy access [to digital assets] without [the typical custody and security challenges]. And so this convenience and this market liquidity, is helping investors to try out [digital assets] very easily.

Traditional banks have compliance concerns related to anti-money laundering and identity verification in the crypto space. How do you address those concerns?

It may be a little bit painful to open an account with us. There is a big queue, because we are using technology that allows us to do forensic analytics [as an anti-money laundering strategy]. You always have to put that into the context of the history of a client.

However, as a start-up you want to be as agile as possible and, as a bank, you want to be as stable as possible. These two conflicting interests — that’s something I need to manage in a very positive, energetic way. It’s very challenging. That’s why I have no hair left.

Who are your competitors?

The crypto ecosystem has grown significantly. But we are a multi-threat. We are like the smartphone; everything is on one platform. Nobody has the offering and the scope and the breadth of the service that SEBA Bank has. And that puts us in a unique position to capture the high growth with our scalable platform.

Authors

Guido Buehler

Guido Buehler

CEO, Seba Bank AG

Guido Buehler is the CEO of the world’s first regulated cryptocurrency bank – Seba Bank AG. Previously, he founded award-winning strategic advisory and risk & research firm B&B Analytics, and built and led global teams at one of Switzerland’s largest banks, UBS. He also had an influence shaping market infrastructure with the European Central Bank and the Depository Trust & Clearing Corporation.

Welcome to I by IMD

Install
×

You have 4 of 5 articles left to read.