Switzerland has always had a progressive approach to banking and finance, especially when it comes to privacy. The country is taking that reputation a step farther by licensing the world’s very first crypto banks. Two blockchain companies have received licenses from the Swiss financial authorities to begin providing banking services for digital assets.
It was announced in late August 2019 that FINMA, the Swiss Financial Market Supervisory Authority, would license two blockchain service providers to offer Bitcoin banking in Switzerland. Banking for other cryptocurrencies could also be offered under the terms of the license. The banking companies licensed were SEBA Crypto AG and Sygnum AG. Both companies are registered in Switzerland.
It is expected that SEBA Crypto AG could begin offering services as soon as October 2019. The company has gotten itself on a fast track thanks to cooperation with one of Switzerland’s oldest private banks, Julius Baer. This partnership may have also helped SEBA get licensing to provide Swiss crypto banking.
As a company SEBA Crypto AG raised start-up capital in excess of CHF 100 million in September of 2018 and now employs over 60 people.
Sygnum AG also has partnerships with Swisscom and other Swiss financial institutions. It’s focus will be to combine traditional banking with banking for digital assets, reflecting a current trend among cryptocurrency investors who want easier access to their digital money.
Strict Regulations for Crypto Banking
Bitcoin banking in Switzerland will not be without its challenges. FINMA has detailed a strict set of regulations that are designed to reduce the possibility of money laundering. A FINMA guidance paper which details how regulations are applied to traditional banking companies will also apply to cryptocurrency banking.
Switzerland was for many years a financial haven for the wealthy and the elite. The soft banking regulations led to the country being used for illicit money laundering and other illegal banking activities. To combat this the country instituted new banking rules that stress KYC, or Know Your Customer, regulations. The legendary anonymous Swiss bank account is no more.
FINMA has concerns that the anonymous nature of cryptocurrencies such as Bitcoin will encourage a return to the money laundering problems of the past. They have set up measures to prevent this from happening and believe that crypto banks can be managed in a way that complies with Swiss banking law.
How will this affect the everyday crypto investor? We know that FINMA will not allow transfers of digital assets from unregulated wallets, and there is also a series of regulations both banks must adhere to that have not been released to the public. Some crypto investors fear that this lack of transparency does not bode well for those who want privacy in their crypto transactions and banking.
Services Provided By Swiss Crypto Banks
The new cryptocurrency banks in Switzerland will be able to let customers buy, trade, and store digital assets. The primary cryptocurrencies that the banks will deal with are going to be Bitcoin and Ethereum, but it is reasonable to assume that support for altcoin crypto banking will also added at some point.
The crypto banking will make it easier for individuals to trade fiat currencies for crypto. Customers can exchange the Swiss Franc, US Dollar, and Euro for Bitcoin and Ether at the current exchange rates. This will solve a problem that has been troubling cryptocurrency investors for the past ten years since Bitcoin was introduced.
Brokerage services are also slated to be provided by the new Swiss crypto banks, but there is no specific timetable for when these services would become available.
Crypto Banking is a Positive Development
In very general terms the licensing of crypto banks in Switzerland is a very positive scenario. It works to legitimize cryptocurrency as an asset class and also could encourage more people to get involved with digital assets.
Crypto banking will also make it much easier for individuals to buy and sell Bitcoin and other digital tokens. Those who have little experience with cryptocurrency could now be encouraged to make their first investments in Bitcoin, Ethereum, and blockchain technology.