Original source: Forbes

Compilation of the original text: Bai Ze Research Institute

Original source: Forbes

Compilation of the original text: Bai Ze Research Institute

Less than half an hour by train from Zurich, Switzerland, in the center of the picturesque town of Zug, there is a century-old building with a beautiful frescoed facade, ancient wooden ceilings and pastel shutters.

The former town hall building is a welcome viewing point for any tour group exploring Switzerland's architectural richness. However, what may surprise the tour group is that everyone who enters and exits the building is in formal attire. A futuristic sign sits atop the door – it reads “Seba Bank” – and the ₿ symbol for bitcoin “gazing” out on the cobbled path through the window.

You might think a skyscraper would be a more appropriate choice for the headquarters of Switzerland's first regulated crypto bank, but Seba's founders chose it for a reason.

It was here, in 2016, that Zug became the first city in the world to accept bitcoin for taxes — even a small place that is just as determined to connect the traditional economy with the new digital one.

Seba’s chairman, Päivi Rekonen, is the kind of fintech leader that legendary investors like Warren Buffett and Charlie Munger would never admit to being a fintech leader — experienced in banking, extremely smart, and unquestionably Firmly believe that Bitcoin and blockchain technology are reshaping the global financial system.

“In my opinion, we are still in the early stages of this new industry, this world of digital assets,” Rekonen, who has held senior positions at tech giants such as Nokia, Cisco, and Credit Suisse, told me.

Rekonen added: “Institutional money as well as professional investors have woken up to the reality of skyrocketing crypto market values ​​– in DeFi (decentralized finance), NFTs (non-fungible tokens) and cryptocurrencies. The data back this up It's happening, it's definitely happening...if you look at the scale of institutional money, then you can see that the industry is just getting started. I think we're at the beginning of the whole industry."

Seba was founded in 2018 by Guido Bühler, Sébastien Mérillat and Guido Rudolphi.

In 2019, it obtained a banking and securities dealer license from FINMA, the Swiss Financial Market Authority, becoming the world's first regulated bank specializing in digital assets. Another licensed is Zurich-based Sygnum. In Switzerland, more regulatory approvals have poured in, including for businesses offering institutional-grade custody of digital assets — another first.

Rekonen continued: “It’s important for us as practitioners to be in a place where we can get access to talent. You can go to local companies, institutions, associations that share your interests – so you can learn and grow.”

However, she added that with any new technology: "When innovations are born, there is often resistance." Cryptocurrencies in general, and Bitcoin in particular, continue to be wrongly viewed as Ponzi schemes and considerable global A tool for some criminals to launder money. Many governments and regulators remain deeply skeptical of the industry, concerned that it could disrupt financial markets and harm investors.

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establish trust

“So,” Rekonen said, “you need to start thinking about how do you build trust with the communities you serve, the customers you want to attract?”

According to Swiss politicians, the answer to this question - is regulation. The Federal Council, the country's top executive body, enacted ten legislative amendments last year, updating the law to clarify rules for regulated entities in custody, securitization, anti-money laundering (AML) and KYC (know your customer) compliance. Combined with FINMA continuing to issue licenses, this comprehensive regulation provides legal certainty for institutional investors prudently venturing into the crypto market.

“[It means] we no longer have to elaborate on what we do because institutions know we are regulated in the same way. They know we have the same AML, KYC requirements,” Rekonen said. “So it sort of shortens the discussion time and also helps us demystify the crypto industry. So we don’t have to spend as much time on trust.”

Like any financial services provider, Seba does not disclose customer details; Rekonen would only say that the majority of its customers could be classified as “early adopters” of cryptocurrencies. They include crypto companies that need corporate accounts to link their fiat and digital assets; miners; founders and team members of successful crypto projects; and high-net-worth individuals with professional investment backgrounds.

But the bank's biggest customers, in terms of assets held -- are already financial institutions.

"Who is the financial institution? Whose money is behind it? It could be a big bank, and the money behind it is their customers. These customers have started asking frequently in the past two years, 'Can you add cryptocurrency to the asset class? Is it in?' If the answer is 'no', then they say, 'Well, where can I invest in it?'”

“So these financial institutions are starting to be pushed by their customers, and at the same time, they’re looking for answers. If you’re a big institution or a small institution — you have to ask yourself the question, am I going to invest in the infrastructure myself? Am I building my own hosted solution on top of my own infrastructure and interacting with all the encryption layers and protocols? Or am I going to find a partner?"

Rekonen strongly hinted that the best antidote to crypto market anxiety is having a trusted crypto partner, in which case a Swiss banking license would be considered “a rare seal of approval.”

It also offers a diverse range of index trackers, such as Sebax exchange-traded products (ETPs). The bank’s research arm is constantly evaluating coins for inclusion in its index, which includes seven cryptocurrencies, with bitcoin (40.4%) and ethereum (21%) heavily weighted. Holdings are rebalanced monthly according to the smart beta methodology. Clients can also use discretionary and active management certificates (AMC) to pick their own basket of crypto assets, allowing clients to customize regulated crypto investment products without having to buy and manage them in the crypto market themselves.

In an era when fiat currency yields are currently historically low (negative interest rates in Switzerland), the ability to generate yield by holding cryptocurrencies is particularly enticing. The bank caters to this segment with its Seba Earn platform, which allows customers to stake three tokens based on the PoS consensus mechanism (Polkadot, Tezos and Cardano), and will soon launch bitcoin and ethereum lending products.

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Regulatory restrictions

These services only scratch the surface of what is possible in the DeFi space, but as Rekonen explained, the bank is treading carefully in advising Swiss regulators to move toward protocols and smart contracts that are at the limit of their ability to oversee them.

"DeFi in a regulated environment is still an innovation, and we've taken the position very clearly that we're going to enter the permissioned DeFi space," she said, referring to protocols like AAVE Arc, which use KYB (know your business) rules to Ensure that all participants in the liquidity pool are identified and approved. "We actually have some really interesting DeFi projects coming up, but I can't talk about them yet. Again, we see institutional demand. They're talking, 'Look, I want to learn about DeFi, I want to be involved'. But for Seeking an open DeFi protocol (with unvetted participants) is just a 'no' for a large institution."

In February, Seba opened its first overseas office in Abu Dhabi, the capital of the emirate of the United Arab Emirates, another crypto-friendly region. The bank has also appointed a chief executive for Asia - based in Hong Kong. With Seba now serving customers in two dozen countries on five continents, it's clear that international expansion is a top priority for Rekonen.

“We are a fast-growing company, but we are still a startup,” she concluded, “so we have to make choices, we have to be clear about our focus areas and strategies. Seba and the entire crypto industry in ten years will Where it's going, I can't comment. I think right now, we have our focus. What's really important for an organization like ours is that we improve the crypto industry with a scale mindset and a replicable model mindset. "

risk warning:

According to the "Notice on Further Preventing and Dealing with the Risk of Hype in Virtual Currency Transactions" issued by the central bank and other departments, the content of this article is only for information sharing, and does not promote or endorse any operation and investment behavior. Participate in any illegal financial practice.