As published on: finews.com, Wednesday 28 June, 2023.
Crypto has been the subject of scandals and lawsuits. Behind the scenes, efforts are afoot in Switzerland to distribute tokens and coins on an industrial scale. Driving the movement are powerful but secretive players, a survey made exclusively available to finews.com shows.
«We like winter,» Ophelia Snyder and Hany Rashwan, founders of Swiss crypto unicorn 21Shares, told finews.com because it's easier to focus on new ideas in a bear market given fewer distractions and «tourists.»
They made the remark in September before the FTX bankruptcy and the Securities and Exchange Commission's lawsuits against the two leading trading platforms, Binance and Coinbase. One might think the crypto winter has turned even colder.
As it turns out, preparations are underway to profit from the next upswing, not just at 21 Shares, but on an industry-wide basis. This is evident not only from the reports of crypto aficionados attending the «Point Zero Forum» in Zurich but also from the analysis by large, established forces in the Swiss financial market.
Financial infrastructure group SIX which operates the SIX Digital Exchange, recently published a survey of 300 investment professionals worldwide. It showed 69 percent intend to hold digital tokens in their portfolios over the next twelve months.
Pricewaterhouse Coopers (PWC) Switzerland recently surveyed 35 local banks, asset managers, family offices, and pension funds about their crypto plans, giving an idea of the broad popularity that digital investments are now enjoying. The results were made exclusively available to finews.com.
Over 70 percent of the banks surveyed believe tokens and coins can be turned into a profitable business in the next two to three years. As many as 94 percent of financial institutions have put crypto on their strategic agendas.
One important driver of demand is a group that doesn't like to make a fuss about itself: family offices. The secretive asset managers of wealthy families are more committed to crypto than other participants. In Switzerland, up to 30 percent are invested in blockchain or crypto, which could rise to 80 percent within three to four years, according to PWC.
The study doesn't explore the motives, but it's safe to say family offices are dealing with a younger generation of heirs considered to be particularly crypto-savvy. When wealthy heirs call for offers, banks cannot afford to stay sidelined for very long because dissatisfaction is spreading.
Only three out of ten customers are satisfied with the crypto offerings of their house bank. Many still don't offer much more than trading and custody of digital assets. Advisors feel it would take dedicated funds, wealth management mandates, and the opportunity for exclusive deals to meet the needs of their clientele.
Unlike in the pioneering phase, financial institutions no longer have to build everything themselves. Swiss crypto banks Seba and Sygnum are fully regulated suppliers of crypto products, and Bitcoin Suisse is targeting institutional clients. Crypto Finance, a Swiss subsidiary of Deutsche Borse spent the last few months building a platform for launching crypto financial products. Others prospecting for business from third-party providers are online bank Swissquote and transaction bank Incore.
It's difficult to reconcile established financial institutions being the beneficiaries of the trend toward crypto with the ideology of a start-up. The movement once envisioned a financial system outside the traditional industry and without intermediaries. But recent scandals have demonstrated the value of regulated offerings as demonstrated by FTX serving global clients from the Bahamas. With Binance, it's unclear where the headquarters of the world's largest crypto exchange should even be.
These are precisely the arguments being made in lawsuits filed by American authorities against leading participants. Many observers see a backlash of supervision from US authorities seemingly intent on institutionalizing the nascent market by curbing or shutting down new players as they emerge.
While this tug-of-war has only just begun in America, Switzerland boasts advanced regulation for blockchain offerings and full oversight. All that remains is for the financial industry to play its well-dealt hand skillfully.