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Swiss Banks Start Offering Crypto Trading To Their Clients

Author: Martin Moni
Martin Moni
All publications of the author

At first, big banks were skeptical about cryptocurrencies, shying away from investing in coins and discouraging their customers to do the same. Now it seems things are changing somewhat as swiss banks begin to offer crypto trading services. These moves have been very beneficial to the crypto industry and also to investors who can now enjoy the benefits of coin trading in a well-regulated environment. This article is going to highlight how banks are making this dream a reality and what it means going forward.

Which banks have started offering crypto trading?

The headlines have been all over the web about Swiss banks, but you probably don’t know which banks have already started offering these services. To help you, here are the top 3 banks that made the news for good reason. (Here’s an interesting question: Will Crypto Trading Become Popular in Islamic Countries?)

SEBA Bank

This was among the first crypto bank to be approved by FINMA during an announcement by the regulator on August 26, 2019. But the company’s history dates back over a year before then when the company, then known as SEBA Crypto AG, secured CHF100 million from private and institutional investors. Among the investors in the company was Julius Baer, a Swiss private bank that has been around for 125 years and holds over CHF382 billion in assets under management (AUM). This was certainly the push SEBA needed to work with FINMA toward the creation of a banking and securities dealer license. 

SEBA management also has to be credited with this accomplishment, having been founded by a group of former bankers from UBS. The company CEO, Guido Buehler, in particular, worked at UBS as a managing director of asset servicing, and this experience of the financial markets must have played a key role in the success of SEBA. Add to that, SEBA chair Andreas Amschwand also sits at the board of Julius Baer which must have played a key role in the investment. (Find out more about: OmiseGo (OMG) Coin and Price Prediction for 2020)

In an effort to provide a connection between traditional and digital assets, SEBA will offer trading, storage, liquidity management, and wealth management services for crypto. These services will be made available to professional investors, asset managers, and businesses but not to individuals. An innovative product will be the tokenization of assets such as fiat, precious metals, and other alternative assets like real estate and investment products. Investors will have access to 5 coins - Bitcoin, Ethereum, Ethereum Classic, Litecoin, and Stellar Lumens. It will be possible to exchange these coins into fiat at any time and, with the help of a bank card, pay for services. (These are the: Most Secure and Regulated Stablecoins of 2020)

Because this was among the first companies to be given a license as a pure-play blockchain services provider, it will very likely become one of the leading companies in the world. (Read this to: Find Out More About Tezos and Its Price Prediction For 2020)

Arab Bank

On September 19, 2019, Arab Bank also made an announcement of its intention to provide crypto trading services for Bitcoin and Ethereum. The announcement came a few weeks after FINMA gave SEMA and Sygnum licenses to offer similar services, but Arab Bank is yet to receive the same license. Nevertheless, the bank is counting on Taurus Group to provide the necessary clout, which has so far been very successful. The bank’s chief executive, Serge Robin, explained that the bank intended to be among the first to offer digital asset services to its clients. 

This partnership is intended to attract professional investors and high-value clients to enjoy the security of Swiss regulations. Through Taurus Protect, all investors should feel confident about the security of their investment in the long term, along with the freedom to exchange coins into fiat whenever necessary. (Here is the: UNUS SED LEO Price Prediction 2020)

Bitcoin Suisse

Although this is another company yet to receive a license, Bitcoin Suisse already applied for a license from FINMA back in July 2019. To aid in receiving the license, the company has already made a deposit of CHF55 million in an unnamed bank as collateral and security for its clients’ fiat deposits. Since then, as the company awaits the FINMA license, it has been embarking on other exploits such as allowing its clients to stake their ether to earn rewards for validating the upgrade to Ethereum 2.0. 

In addition, a strategic partnership with Worldline could make Bitcoin Suisse strategically positioned in the European payment services. Worldline has over 65,000 merchants in Switzerland alone, which is huge for the country. Should Bitcoin Suisse receive its license from FINMA, it may begin to offer payments in crypto. From then on, the service may expand further across Europe on the back of Worldline’s popularity. (Find out: What is Huobi Coin and its Price Prediction for 2020?)

How is this possible?

Swiss banks with an interest in coins have a huge advantage over their counterparts in other regions of the world - friendly regulations. Unlike other countries that have been reluctant to accept cryptocurrencies, Switzerland took the opportunity to become a world leader in the industry. Perhaps this was because of the country’s waning position as the world’s bank after caving in to pressure from the international community. For decades, the country had been the preferred destination for stashing wealth offshore due to high levels of banking secrecy. 

This came to an end in 2018 when the country’s Federal Tax Administration (FTA) began to share financial account data with other countries. This move put the Alpine federation in tough competition with other countries such as Singapore and Hong Kong. However, with the rise of cryptocurrencies, Switzerland might have the opportunity to regain its position as a leader in banking. (Here is everything you need to know about: THETA Coin Investment and Price Prediction 2020)

Laws surrounding coins in Switzerland

This is why in December 2018, the Financial Market Supervisory Authority (FINMA) started issuing a Fintech license. Companies interested in developing blockchain technologies could do so in a regulated environment so long as they adhered to strict AML (anti money laundering) laws. This structure was also different from that in countries such as Lichtenstein and Malta that had created specific laws about blockchain technology. With a Fintech license, the companies basically work under the same financial laws as other companies in the same industry, with the exception that adjustments would be made to suit the technology. 

Even before the Fintech license came about, Switzerland had already become a popular base for launching ICOs. This was thanks to an earlier release of an ICO regulatory framework in February 2018 following FINMA’s guidelines from September 2017. There aren’t any specific regulations about ICOs, since all ICOs are designed differently, but FINMA categorized them into 3 different forms:

  • payment tokens
  • utility tokens 
  • asset tokens

The first category (payment tokens) are those that are meant to be used as a means of payment/remittance such as Bitcoin and Litecoin. These are not considered to be securities since their only purpose is to transfer funds. Utility tokens are a bit more complicated because, while most only give access to a service on a blockchain network, some can also be used as a means of investment. Asset tokens are considered to be securities, just like bonds, equities, and derivatives because these represent an asset issued through the ICO. (This is: How Libra Coin Will Change the World's Financial System)

It is not surprising, therefore, to realize that a lot of companies have been setting up bases in the country thanks to these favorable laws. Among the first was Ethereum Foundation as early as 2014 and more companies would follow suit. Not only do companies prefer to operate in a country with defined regulations, but they also recognize that investors would be attracted by the strong financial regulations in Switzerland. 

Taxation for companies in the industry comes down to the individual cantons involved, so naturally, some cantons became more popular than others. The lakeside town of Zug has become the most favorable location to over 750 crypto companies, including banks, because of its low corporate taxes. The region has become so prolific for this that it is often referred to as Crypto Valley. In this canton, municipal services can even be paid in Bitcoin up to CHF200 and other cantons have similar services. (What you should know about: Trading with Bitcoin Futures on US Stock Market)

That being said, taxes are still quite high since coins are treated as foreign currency and thus subject to wealth taxes. The amount of tax is determined at the end of every fiscal year, with an exchange rate of CFH/BTC also being established on that date. This gives coins a lot more legitimacy because they are recognized by the authorities. (Here is our: Cosmos (ATOM) Price Prediction 2020)

Additional revenue and competition

With the loss of Switzerland’s position as the world’s bank, banks have been trying to find new sources of revenue. Going by the recent launches of SEBA and Sygnum with the backing of major legacy banks, this point is very clear. Even UBS CEO Sergio Ermotti told CNBC that blockchain and crypto had become almost a must for businesses. 

While Julius Baer may be seen as the victor with SEBA holding a license from FINMA, the industry is already very crowded and the road ahead will definitely be tough for SEBA. For instance, another legacy private bank, Hypothekarbank Lenzburg that has been around for 150 years, had already been operating accounts for crypto businesses since 2018. Arab Bank is another major bank already offering similar services, as are others including Falcon Group, UBS, Gazprombank (Switzerland), etc. (And this is the: Binance Coin Price Prediction 2019)

It is this competition and fight for revenue that is puling mainstream banks toward crypto trading, but there is yet another driver - Fintech startups. You see, the proliferation of crypto in Switzerland encouraged all manner of development around blockchain. Most of the startups in the industry, though, don’t have the pull needed to launch a fully-fledged crypto bank, but they can work with existing banks to achieve this goal. In fact, this is what you see mostly among Swiss banks interested in the crypto industry. (Have you ever wondered: Will Forex Trading Be Illegal in Future? Last Law Decisions)

Following Julius Baer’s foray into the crypto space, Arab Bank partnered with Taurus to provide crypto services to its clients. Taurus offers a service called Taurus Protect that is a vault for Bitcoin and Ethereum. Security is a major concern for investors, especially when dealing with millions and perhaps billions of dollars worth of coins. This partnership is meant to encourage investors to trade and invest in crypto with the security offered by Taurus and under the regulations of FINMA. 

Taurus is also in partnership with Bank Vontobel to offer a service called Digital Asset Vault. This is similar to Taurus Protect by Arab Bank, with the addition of being able to trade coins outside the balance sheet. Another partnership is that between Gazprombank (Switzerland) and Avaloq and Metaco to provide Silo. Bank Zarattini, meanwhile, has partnered with Inacta as Bitcoin.com and Cred have partnered to provide Credearn. Credearn basically allows investors to earn interest in the coins they hold. This can be, say, 10% on Bitcoin core (BTC) and 6% on Bitcoin Cash (BCH). (These are the: Main Features of Canadian, US, Australian and UK Forex Industries)

These kinds of partnerships can be found all over among Swiss banks, and they explain how crypto trading has become so common in the country. 

What does this mean for Swiss banks in the future?

A natural question to ask at this point is whether or not this trend is going to continue into 2020 and beyond. We have already seen that some banks are interested in complimenting their conventional banking services with crypto, but is Switzerland the place to be? Well, that would not be an automatic yes, as you would think. Despite all the benefits of running a crypto company in Switzerland, it is, first of all, a very costly area in which to operate. The country has been consistently ranked as one of the most expensive countries to live in, which gets worse for smaller companies starting out in the industry. (Investors should know about the: aelf (ELF) Network Long-Term Forecast)

However, the most important setback every company or bank should consider if interested in setting up a crypto trading service is the Swiss National Bank (SNB). Even though the country’s financial regulator FINMA has been accommodating to the crypto industry, the SNB has been anything but. The SNB is extremely worried about money laundering, and this worry has made it very difficult for crypto companies to operate banking accounts within the country. For instance, companies that raise funds through ICOs are usually forced to deposit money in offshore bank accounts as most banks in the country will not allow this. 

In 2017 when there was an ICO boom, 4 of the top 10 ICOs of the year were launched from Switzerland, and yet most of the money could not be deposited into Swiss banks. The SNB pointed at the example of Tezos, which was one of the most successful ICOs of the year but which is yet to get off the ground more than two years later. Due to such failures, other companies have been unable to launch their ICOs, taking away most of the shine Switzerland once had. (Click here to: Find Out More About Tezos and Its Price Prediction For 2020)

Due to these difficulties, a lot of coin companies are moving to more friendly locations like Gibraltar, Lichtenstein, Cayman Islands, Malta, etc. This exodus is changing the way even Swiss Banks continue to offer crypto trading to their clients and perhaps we may come to see a decline in 2020. Of course, there are still some major banks that do not rely primarily on crypto trading for revenue. This group will continue to be situated in Switzerland, but many startups will start to look elsewhere away from the Crypto Valley. (Learn more about the: Launch of The Binance Decentralized Exchange Future (DEX))

Parting shot

The advances made among Swiss banks are very encouraging to the entire coin industry as it signals what may happen in the future. From what you can see above, there are some clear benefits to offering crypto trading and Switzerland makes this possible to do.

 

To get a glimpse of the hype surrounding crypto banks in Switzerland, here is a clip following the approval of SEBA on CNN:

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Risk Warning: Your capital is at risk. Statistically, only 11-25% of traders gain profit when trading Forex and CFDs. The remaining 74-89% of customers lose their investment. Invest in capital that is willing to expose such risks.
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