Swiss blockchain startups launch a Crypto bank, ETP & AI managed stablecoin
The tiny town of Zug in Switzerland gained worldwide fame in the past couple of years as the ‘Crypto Valley.’ Switzerland has traditionally been a money magnet for most of the wealthy elite & investors around the World with its sound business infrastructure, minimum red tape, low corruption, stationed right in the heart of Europe. These ingredients along with the privacy-friendly legislation, availability of world-class talent with Crypto friendly local government propelled this town of 30,000 to the position of second largest ICO market in the World in 2017. Although Zug’s ranking has dropped a few spots this year to sixth place, it’s still acting as a Blockchain incubator for many of the upcoming innovative projects.
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The town already has a few feathers in its cap — becoming the First city in the World to accept Bitcoin payments for municipal taxes in 2016, next year in 2017 saw the city implementing the digital ID system for its citizens, following it with a local blockchain-based voting system in 2018. Apart from this, Zug is home to Crypto Valley Association (CVA), a government-backed nonprofit entity which has the mandate to support blockchain startups, host industry events, creating standards & regulations and connecting with other centers of innovation while working with FINMA (Swiss Financial market regulator). Other Jurisdictions are creating their Crypto friendly regimes based on the success of the Swiss model (figure below). We are however going to be talking about a few of the more recent Swiss-based projects that have caught everybody’s attention.
SEBA Crypto AG
With a sharp downturn in the prices of the digital coins most people are reluctant to make any big moves in the Crypto market — be it investing in the Cryptocurrencies or starting a new blockchain-based project but one Swiss-based startup namely, SEBA Crypto AG, has taken a bold step of launching a regulated Crypto bank which would offer wide-ranging services including Cryptocurrency trading, ICO underwriting, Advisory, Corporate financing, Asset management and Custody services for institutions. SEBA has already applied for a securities & dealer license with FINMA and expects to receive it sometimes in the new year.
The Zug-headquartered venture netted around $103 million in the first round of funding. Notable investors include Switzerland’s BlackRiver Asset Management and Hong Kong-based Summer Capital apart from other public & private players from Switzerland, China, Hong Kong, Singapore, and Malaysia. The bank will be headed by Guido Buehler & Andreas Amschwand — former executives of the UBS bank. The experience & connections of these prolific bankers adds credibility to the Project. The bank intends to launch its operations starting in 2019 from Zurich, before expanding to the other financial hubs around the World, specially other parts of Europe & Singapore. For its expansion plans the Bank might opt for a series B funding via the launch of an ICO (Initial coin offering) for about $200 million, however, no dates have been set so far.
On the other side of the pond, Goldman Sachs backed Crypto startup Circle has applied for a federal license in the U.S to operate as a licensed entity for offering Crypto brokerage and trading services in all 50 states of the country. While, Fred Schebesta, one of Australia’s leading tech entrepreneurs plans to open a Crypto bank in Australia to serve the growing needs of Cryptocurrencies since the traditional banks are so afraid to touch the digital coins. Schebesta proclaims he can accomplish the task within 18 months but needs an authorized deposit-taking institution license (ADI) which has already been applied for. For now, the Swiss-based Crypto bank seems to be on track to becoming a pioneer in Crypto banking as put by Buehler in these words:
“SEBA wants to bridge the gap between traditional banking and the new world of crypto. With safety, transparency, and performance as core values, our ambition is to become a market leader in the convergence of traditional finance with the crypto economy.”
While the pending decision of Bitcoin ETF (Exchange traded fund) application is being eagerly awaited by everyone, other alternative investments in the digital assets are cropping up all around. The most recent one being an ETP — Exchange traded Product. Although it is commonplace to use both ETFs & ETPs interchangeably, there are subtle differences. Both of them are traded on the stock exchanges like common shares where the price is determined by the performance of the underlying asset or index. Also they transact with third parties like derivatives or stock-lenders to increase their returns by taking collateral in such transactions. However, ETFs are funds with minimum diversification requirements & fund is only allowed to be invested in certain categories of the underlying asset — And the functions of Fund custodian, auditor & issuer are separated.
In this case, another Zug-based Swiss startup Amun AG — a sister concern of the UK-based Fintech company Amun Technologies has launched a global multi-crypto ETP. The ETP index will be managed by the German investment firm VanEck and will be traded on Switzerland’s main SIX stock exchange — Europe’s fourth largest stock exchange with a market cap of $1.6 trillion. The ETP index named HODL will have the following composition:
Bitcoin (BTC)>49.7% — Ripple (XRP)>25.4% — Ethereum (ETH)>16.7% BitcoinCash (BCH)>5.2% — Litecoin (LTC) >3.0%
And though the launch of a Swiss ETP is a welcome achievement with signs of a maturing Crypto market, a similar product already exists in the U.S market by Grayscale Investment’s Bitcoin Investment Trust with the ticker symbol GBTC. However, a drawback of the GBTC is that it trades at a significant premium to the actual market price of Bitcoin. Another alternative in the form of an ETN — Exchange Traded Note (CXBTF) trades on the Nasdaq Stockholm Exchange which is available for both European & American investors.
X8 AG, another innovative Swiss-based blockchain technology company has come out with a new generation stable coin called the X8Currency — an Ethereum based stable coin with the following robust features:
- The digital token is fully compliant with the laws set forth by the Swiss regulatory regime.
- X8X is backed by a basket of eight fiat currencies (US Dollar, Swiss Franc, Euro, Pound Sterling, Japanese Yen, Australian, New Zealand and Canadian Dollar) & reserves of Gold. The basket of fiats & the precious commodity backing creates a factor of price stability & value preservation.
- The digital tokens are backed by assets of equal value deposited in bank accounts to match the value which gives credibility to the project. Also the fiat currency backing provides the much needed liquidity.
- Risk & Funds management is conducted by proven & tested AI platform called ARM, a hallmark of this project.
- Finally as a cherry on top, the project has obtained certification from the Shariyah Review Bureau (SRB) for it being compliant with Islamic finance laws which has opened up the untapped Middle Eastern market for them. The team is already in talks with local exchanges of Abu Dhabi, Dubai, and Bahrain and also intend to open a regional office in the Middle East.
Switzerland has the distinction of hosting more than 500 Blockchain/Crypto projects mostly around the Crypto valley of Zug. With the comprehensive regulatory environment & a digital-friendly economy, Switzerland has become ground zero for launching & achieving a financial services paradigm shift.
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Originally published at www.datadriveninvestor.com on November 22, 2018.