In your role at Falcon Private Bank you are responsible for digital custody & trading, digital product & service development and process management. To not fall behind, what is important for banks to consider and implement these days?
We live in the digital age with the current evolution of the Internet of Things (IoT). It is important to understand how digital technologies are redefining the principles of strategy and changing the rules, not only for banks, to compete and succeed. Digital technologies change how we connect and create value. This challenges traditional banks, established before the Internet, to rethink their strategic assumptions and transform how they think about competition (building platforms, not just products), customers (harnessing networks), value (adapting one’s value proposition), innovation (rapid experimentation) and perhaps most importantly, how to use and move data (turning data into an asset).
How big is the demand for digital and crypto assets now and how are you educating Falcon Private Bank clients about their options?
We are still at a very early stage of applied Blockchain technology in the financial industry. Current digital financial products like crypto assets are very new as a concept of creating and potentially returning value.
When looking at the diffusion curve (adoption) for any innovation, we find ourselves in the early adopter phase of blockchain-based assets, characterized by more local rather than global adoption.
On a worldwide basis, adoption is less than 1% according to recent study I read. At Falcon we educate our clients, prospects and community through holding events, giving presentations and directly through our relationship managers’ client contact. We cover the basics on what crypto currencies are as a new asset class for private investors to consider, how to gain exposure in an emerging asset class like Bitcoin as an alternative investment and show how cryptocurrencies remain uncorrelated with any other major asset class, making it an attractive asset for suitable investors.
Despite Bitcoin’s high volatility compared to traditional asset classes (cash, bonds, equities, alternatives such as real estate, hedge funds and gold, among others), adding Bitcoin to a given portfolio can potentially enhance return. We also highlight the major risks of this asset class that need to be considered: crypto bear markets are very severe, crypto currencies are highly correlated among themselves, there is limited market liquidity and issues like cyber risk and significant regulatory risks.
Falcon publishes two (digital only) crypto related reports: Falcon Crypto Monthly and Falcon Crypto Alert that can be accessed on the following channels:
Crypto-dedicated banks are receiving increased attention, growing in number and expanding services fast. FINMA recently granted Seba Crypto and Sygnum bank a banking license. In your opinion, what does that mean for “Crypto Nation” Switzerland?
The granting of banking licenses to SEBA and Sygnum as crypto banks gives a positive statement to the world regarding our market positioning as a “Crypto Nation”. These are serious steps and efforts to demonstrate that, together with Swiss banking law and regulations, Switzerland is establishing a strong blockchain infrastructure, building capacity and continuing the expansion of experience and capabilities in the growing global digital assets space.
What sets Falcon Private Bank apart from such projects?
What sets Falcon Private Bank apart from new crypto banks is our ability to merge over 50 years’ experience in the wealth management business with our innovative blockchain solutions that we introduced in July 2017 as a pioneer in Swiss private banking. For cryptocurrencies and digital assets besides traditional financial assets, Falcon has experienced specialists, audited and proven processes, technologies and controls. This allows us to confidently serve the full range of investment interests of our private and institutional clients; those interested to expand into an emerging asset class; early investors who made their wealth in crypto willing to diversify into more traditional assets; finally clients who want to sleep easy knowing their digital assets are safe, fully regulated and insured.
Is it realistic to say that eventually all banks will have to include services for digital and crypto assets?
Blockchain is a new technology. One can apply it in numerous ways. A first application in the financial world was the transaction performed early 2009, on the Bitcoin protocol on block 170, between Satoshi Nakamoto to Hal Finney. Now with the evolution of other powerful protocols like Ethereum, additional crypto assets (e.g. altcoins) have appeared plus smart contract applications — required for the tokenization of assets.
As bonds, stocks and other financial instruments as we know them today will eventually make the shift to distributed ledger technology (DLT) and trade in tokenized form against cash tokens (stablecoins) or payment tokens (e.g. bitcoin, ethereum), banks will inevitably include digital asset services due to the efficiency gains in settlement and reduction of risks.
This technology shift will also include non-bankable assets, meaning illiquid assets like real estate and collectibles such as fine art and rare automobiles, which play an important role in wealth management.
How long will that take in your opinion and what will be the biggest challenges in terms of customer needs and regulations?
In my opinion, there are three main challenges to overcome, both locally and globally, for greater adoption of digital assets: legal, infrastructure and operational.
- Legal: The cornerstone of any transaction is a contract. Buying and selling involves the transfer of ownership and safeguards. This will require significant advancement in country and international legal frameworks to cater for new definitions of digital assets, the exchange of and the rights to the underlying economic value of the underlying asset and investor protection.
- Infrastructure: The development, testing and implementation of digital market places and standards for the regulated issuance and seamless secondary trading of tokenized assets across different underlying blockchain technologies.
- Operational: The operational readiness of banks and exchanges to implement and govern changes in strategy (business, customer, product and service) involve significant investment of limited resources in people, systems and processes plus changes in policy.
Your role is demanding and you perform your job with passion. How do you keep track of new industry developments, inventions and trends that define the future?
As a child growing up, I was encouraged to be curious, learn, read books and experiment. Nothing has changed.
I like to see the big picture, connect the dots and be ready to embrace change — which is a constant.
As a Gen Xer, I have seen significant changes in industry developments from analog to digital, like the first personal computer, the Sony Walkman, the advent of the internet, the first mobile phone to smart phones and Spotify. However, given the increasing speed of change, it is unrealistic to keep on top of all the exciting changes and innovation — but with the internet, you can find what you need when you need it.
You have a long and international record of accomplishment working with big Wall Street players and banks. How did you get into digital and crypto assets and what was your experience like coming to the “small” Crypto Valley?
I came to Falcon and the Crypto Valley because I wanted to be part of creating digital history, not simply read about it.
Since being at Salomon Brothers in New York and London during the early days of complex derivatives and structured products, it became obvious to me that ‘crypto assets’ as a new asset class was the next big opportunity in finance and risk management. Having always worked closely with technology, in particular when at IBM managing innovative ‘blue sky’ projects with mathematicians and programmers, I did not want to miss exploring the Blockchain and fintech wave early.
The Crypto Valley is not so ‘small’ — on the contrary; I see it as the Wall Street or Silicon Valley of applied digital technology.
For me, Crypto Valley stretches beyond Zurich and Zug and includes la Romandie (Geneva, Lausanne) and Basel with the Center for Innovation in Finance at the University of Basle and the new SNB/BIS innovation hub. The Crypto Valley is truly a Swiss-wide nucleus of determined international educated individuals and seasoned professionals including politicians and our regulator FINMA — who all want to succeed and make measured strides together to build our “Crypto Nation”. Switzerland is the place to be for crypto and Blockchain.
About Katie Richards
Katie Richards is the Head of Digital Custody & Training and Head of Process Management at Falcon Private Bank. She has 28 years of experience in financial services, corporate and digital environments. Her record of accomplishment includes senior positions in a number of the worlds’ leading institutions, including Salomon Brothers, IBM, Credit Suisse and UBS as well as dynamic digital strategy companies like FairWinds Partners. At Falcon, she is charged with responsibilities related to banking operations for digital assets and services, as well as process management and governance. Katie holds degrees from McGill University (BComm), Cass Business School (MSc.) and University of Cambridge (MPhil). She also holds a number of professional certificates including Financial Risk Manager (FRM), Professional Consultant (IBM), Lean Sigma Black Belt (Credit Suisse), Introduction to Digital Currencies (UNIC) and Digital Strategies for Business (Emeritus Institute of Management & Columbia Business School).
