Binance VIP Voices: Exploring Institutional Adoption of Digital Assets in Switzerland
Main Takeaways
Switzerland’s Crypto Valley is recognized as a global blockchain hub due to regulatory clarity, a strong financial ecosystem, and a culture of innovation and decentralization.
Institutional adoption of digital assets in Switzerland is expected to grow with more diverse investment tools and strategies, despite current limitations and gradual integration.
The Swiss crypto banking and asset management sectors are evolving to meet higher demands, focusing on regulatory compliance, efficient onboarding, and the development of tailored investment products.
Our first episode of Binance VIP Voices for 2024 delves into the institutional adoption of digital assets in Switzerland, featuring insights from leading figures at CV Labs, Sygnum Bank, and Z22 Technologies. This session unpacks the unique ecosystem of Switzerland’s Crypto Valley, the strategic shifts in portfolio management influenced by recent regulatory and market developments, and the evolving landscape of crypto banking and asset management within the institutional sector. Featuring insights from:
Tracy Trachsler (Managing Director, CV Labs) — Tracy drives corporate and institutional engagement at CV Labs, located in the heart of Crypto Valley, Zug (Switzerland). Her work in strategy and digitalization, including projects for major brands, supports CV Labs’ aim to innovate through blockchain. She has MAs from Yonsei University and the University of St. Gallen.
Philipp Baumann (Founder, Z22 Technologies) — Philipp leads Z22 Technologies, a Swiss-based, FINMA-regulated hedge fund that specializes in volatility trading using Machine Learning. Their systematic approach focuses on data-driven algorithms for investment in traditional and crypto markets.
Markus Hämmerli (Head Portfolio Management, Sygnum Bank) — Markus oversees Portfolio Management at Sygnum Bank, the first regulated Digital Asset Bank with licenses in Switzerland and Singapore. His extensive background includes managing multi-asset and fixed-income funds, along with expertise in private banking and institutional client services.
The panel provides a comprehensive overview of the current state and future expectations for digital assets in Switzerland, highlighting the challenges and opportunities in integrating blockchain technology into traditional financial systems.
Read on for highlights from this very special webinar!
Disclaimer: the material below has been edited for length and clarity. These insights represent the views of our guests only and are not officially endorsed by Binance.
1 / On the Swiss Digital Assets Ecosystem
What factors have led to Switzerland’s recognition as a leading hub for blockchain and digital assets worldwide?
Tracy Trachsler: Key factors include regulatory clarity, essential for startups to ensure long-term sustainability and attract investments. Zurich’s role as a financial hub, combined with the presence of tech giants, bolsters both financial and technical talent. Moreover, Switzerland’s technical universities contribute fresh talent. The country’s ethos, emphasizing decentralization and innovation, complements the blockchain industry well. Government support for emerging industries has enabled the organic growth of ‘Crypto Valley’.
Philipp Baumann: Fully agree with Tracy. As a FINMA-regulated asset manager [FINMA is the Swiss Financial Market Supervisory Authority], we value regulatory clarity highly. FINMA’s precise regulations greatly simplify our regulatory navigation, enhancing our operational efficiency compared to peers in less stable jurisdictions. While initiating operations may seem simpler in some other regions, the potential for abrupt regulatory shifts poses a real risk. Unexpected regulatory changes can impose significant compliance costs. Switzerland offers regulatory stability, benefiting not only asset managers but also ecosystem service providers like Markus and Sygnum.
Markus Hämmerli: In agreement, and expanding on this, Switzerland’s unique position, a lack of natural resources, has forced it to innovate and compete globally, ensuring it stays ahead in offering high-quality services. Its strong currency and political stability, even during crises like COVID-19 and the European debt crisis, have supported its solid financial environment. This, along with favorable taxes and a supportive atmosphere, has been key for company growth across various sectors, including crypto, benefiting from these strengths.
2 / On Future Developments in The Institutional Sector
What are your expectations for the adoption of digital assets within the institutional sector in Switzerland?
Philipp Baumann: Crypto is still a young asset class, poised for increased adoption in investment portfolios over time, though not abruptly. The US’s Bitcoin ETFs and related marketing are boosting awareness, setting the stage for greater liquidity and regulatory clarity — key for asset managers to create and offer crypto products. Currently, traditional asset management offers limited crypto investment tools. The future should see more diverse instruments and strategies, facilitating institutional adoption in Switzerland, albeit gradually.
3 / On the Evolution of Crypto Banking in Switzerland
How is B2B crypto banking in Switzerland adapting and expanding to accommodate the increasing demands of clients, especially considering the significant growth and high expectations for this sector?
Tracy Trachsler: The B2B banking sector is vital for crypto companies, handling essential operations like payroll and supplier payments. Although Switzerland is crypto-friendly, high compliance costs pose challenges, making banking services for crypto firms resource-intensive. Despite this, the anticipated market recovery signals growing interest from crypto companies in Swiss banking services, benefiting banks like Sygnum and others in the space. This opportunity points to potential growth, but navigating compliance costs remains a challenge.
Markus Hämmerli: Bridging traditional and crypto services is key to broadening adoption. A fully regulated ecosystem that combines the strengths of traditional banking with the innovations of crypto banking is essential. Service providers with experience in navigating the regulatory and technical complexities of crypto can support companies new to this space. Switzerland’s position as a crypto-friendly jurisdiction, along with its established banking services for digital assets, continues to attract interest and is likely to see further growth.
4 / On Institutional-Grade Custody in Asset Management
How are asset managers integrating institutional-grade custody and banking services into their business models to meet compliance and operational needs?
Philipp Baumann: Merging the liquidity and functionality of platforms like Binance with the regulatory assurance of banks such as Sygnum is crucial. This blend, important for creating tripartite agreements, meets institutional asset managers’ compliance needs. Exchanges are moving towards services that are more institutional-friendly, recognizing the importance of risk management for third-party funds. Yet, the onboarding of crypto-related entities remains slow, often stretching to six months, a timeframe that’s too lengthy for the crypto market. There’s a need for quicker onboarding for regulated firms, enhancing collaboration between crypto innovations and the established financial system.
5 / On Demand for Crypto Investment Products
What types of investment products are Swiss crypto asset managers most interested in currently, and what trends do you foresee in the sector for this year?
Philipp Baumann: In response to volatile market conditions, active risk management is gaining emphasis, with asset managers leaning towards strategies that mitigate drawdowns and ensure positive client outcomes, contrasting with the traditional move towards passive methods. There’s growing demand for efficient processes and tools, including tripartite agreements, streamlined onboarding, cost-effective banking, and sophisticated role management on trading platforms. High operational costs and the absence of institutional-level role management have spurred the creation of tailored solutions for better security and oversight. These developments and needs are shaping the direction of the Swiss crypto asset management landscape.
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