Friday, January 17, 2020

Sygnum Becomes World’s First Licenced and Regulated Digital Asset Bank

Masozi Appleton
After studying finance in the US, I went on to a career in traditional finance. My interest in fintech, and crypto in particular, as led me to become involved in reading and writing about it as much as possible. I'm excited to see where it will go over the coming years.

Swiss-based Sygnum, a digital asset investment and solutions provider, has become one of the world’s first licensed and regulated digital asset banks after receiving conditional approval from the Swiss Financial Market Authority (FINMA). The bank now hopes to secure similar regulatory approval in its secondary base of Singapore, where it has already begun the process of petitioning for a capital markets license.

Sygnum is one of two Swiss-based banks to receive securities dealer licenses this year, the other being the Zug-headquartered SEBA Crypto AG, which plans to begin operating by October. The licenses naturally come with certain rules, some of which are tailored to accommodate the unusual nature of blockchain technology. Due to the anonymous characteristics of certain digital assets, the banks will need to follow FINMA guidance on anti-money laundering best practices. One of these includes a restriction on the transference of digital assets to unknown entities, meaning the banks can only transfer digital assets between their own customers.

Speaking to CNNMoney in Zurich, Sygnum co-founder Mathias Imbach describes where he sees the company going from here and discusses some hurdles that the blockchain industry faces. Imbach believes the move by FINMA sends a message to the world that the blockchain sector is finally being taken seriously by a well-renowned financial hub such as Switzerland. When asked of any potential competition posed by SEBA, Imbach stated his companies desire to collaborate rather than compete with the firm.

“We want to collaborate, we are not for barriers, we believe in networks and these banks will be nodes of networks between which these transactions can happen freely,” he said.

With a team of experts in both finance and distributed ledger technology (DLT) – the basis of blockchain – Sygnum offers a scalable and reliable method by which customers can invest in digital assets while maintaining independent control over their investment. Clients will initially have the opportunity to invest in Bitcoin (BTC), Ethereum (ETH), and digital Swiss francs (CHF) using a range of fiat currencies including US and Singapore dollars, Euros and traditional Swiss Francs.

A global focus on regulation and licensing

In the U.S., digital banks have also been growing in popularity the past few years, with EQIBank recently becoming the first licensed and regulated offshore bank that supports both traditional and digital assets. In October last year, the bank received its banking license in CARICOM and regulatory approval from the Dominican Financial Service Unit and Eastern Caribbean Central Bank.

“EQIBank, which was the first digital bank in this space, believes the advent by FINMA of a regulatory pathway is another helpful precedent,” states EQIBank CEO Jason Blick. “The move supports longstanding innovative banks like EQIBank. But many questions remain. FINMA’s resolution is the first step in a long journey for incumbents new to the market.”

EQIBank is focused on providing high-quality, professional digital banking services to corporate and HNWI looking for an offshore solution. Its position in Dominica means it can offer customers attractive tax-free banking in a well-regulated and licensed environment. However, Blick notes that for these emerging banking entities to achieve success, the correspondent banks which make up the “lifeblood of the US$130 trillion banking industry” need to show equal enthusiasm. Well-thought-out and supportive regulation is key to achieving this collaborative effort.


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