How Sygnum, the world’s first digital asset bank, is set to spearhead mainstream adoption of digital assets such as cryptos, tokens
Traditional, bulge-bracket banks have for long eyed cryptocurrencies, tokens, and other forms of digital assets with healthy skepticism, tending to avoid offering them as an integrated banking solution. This has slowed the adoption of digital assets by institutional investors and made it difficult to empower everyone to have access to digital assets.
But blockchain-based digital assets firm Sygnum, which recently became the world’s first digital assets bank, is set to change that.
The digital asset technology group – which won a banking and securities dealer licence from Swiss regulator Swiss Financial Market Supervisory Authority – wants to empower companies and professional investors with direct access to digital asset banking solutions.
In becoming the world’s first blockchain technology-powered digital assets bank, the Switzerland and Singapore-based firm is poised to bring the financial industry a step closer to the integration of digital assets such as cryptocurrencies with traditional banking.
“To date, a lack of institutional-grade custody and a truly integrated banking solution has slowed the adoption of digital assets by institutional investors”, says Luka Müller-Studer, Co-founder and Chairman of Sygnum.
“The licence announcement is a game-changer. By methodologically incorporating digital assets into traditional banking, and injecting much needed distributor ledger technology (DLT)-driven agility, Sygnum is accelerating the development of an important new asset class,” he adds.
As the world’s first crypto bank, Sygnum will provide custody, deposits, capital issuance via tokenisation, credit and lending, and brokerage services of digital assets to institutional and professional investors. This includes providing trading and management services of cryptocurrencies like Ethereum and Bitcoin, and the conversion of fiat currencies such as Swiss francs into these two cryptocurrencies.
For its corporate clients, Sygnum also plans to enable them to raise new capital by producing asset tokens based on existing financial assets, thereby lowering capital raising costs and improving liquidity for issuers and investors.
In addition, Sygnum’s other offerings include a lombard loan facility that leverages fiat liquidity and cash flows through loans on digital assets as well as B2B banking services for existing financial institutions so they can provide regulated digital asset products and services to their own customers.
A bridge between the traditional and the new
To be sure, Sygnum’s co-founders -- Luka Müller-Studer, Mathias Imbach, Gerald Goh, and Manuel Krieger -- set out to bridge this very gap between the traditional banking industry and the digital asset economy when they first founded the global bank that is based on Singaporean and Swiss heritage.
Their aim was to enable the mainstream adoption of digital assets using a distributed ledger technology, which operates on the same consensus principle as that of blockchains, in a trusted, comprehensive, and regulatory compliant ecosystem.
“We (co-founders) came together in 2017 in Singapore and said, look, this is great technology but it’s detached from reality because it’s not linked to today’s financial system-based rules and regulatory frameworks. And so we said, we need to build this bridge and this is what Sygnum means,” says Mathias Imbach, Co-Founder and CEO, Sygnum Singapore.
One of the first things Sygnum founders set out to do was address the trust issues that existed in the financial industry for digital assets. To do this, they believed that the ‘bridge’ between the traditional banking industry and digital assets had to be created in major financial and banking hubs such as Switzerland and Singapore.
“We also knew we can't do this alone, particularly when it comes to the custody of these digital assets. So, we partnered with Swisscom, which is the largest IT company in Switzerland, and we built the solution together with them. So basically, if you save your digital assets with us, there's a big state-controlled company like Swisscom behind where your assets are held, which kind of gives the trust,” Mathias explains.
In March, German stock exchange operator Deutsche Boerse entered into a strategic agreement to invest in Custodigit AG, a JV founded in 2018 by Swisscom and Sygnum that provides a technical solution for the custody of digital assets for regulated financial services institutions.
At the time, Swisscom said the aim of the partnership was to jointly build out and grow a trusted and regulatory compliant financial market infrastructure for digital assets. In other words, the partnership sought to build an integrated platform that allows bank customers to manage the entire life cycle of their digital assets.
“This will be an uphill battle politically and also with the regulators, but we have had the luck of convincing some renowned figures in the banking world. So we have the traditional world helping us. That, as well as the hard work by a very smart team has made this growth and banking license happen,” says Mathias.
To be clear, the 65-member-strong company Sygnum has some venerable names from the traditional banking world on their board, including Philip Hildebrand, Vice Chairman of BlackRock and former president of Swiss National Bank, and Peter Wuffli, former Group CEO of Swiss investment bank UBS, among others.
As a fully licensed bank in Switzerland, Sygnum, which has so far raised about 60 million Swiss francs, is now focusing its marketing efforts on its digital assets banking solutions in Switzerland and asset management solution in Singapore, where the company has currently for a capital markets services (CMS) licence.
The digital assets bank, which is carrying out pilot programmes this month and preboarding customers for when services go live, is seeing significant interest from around the world.
“We have requests from all over the world. We have a pilot phase where we're going to start very slow now with some friends and family just for this month. And then from October onwards, we will be more and more open,” Mathias adds.
Empowering a digital asset economy
Indeed, with the newly-acquired Swiss banking licence, Sygnum believes it is now poised to empower everyone everywhere with direct access to ownership and value, backed by its core principles of building trust in the digital asset economy, harnessing the benefits of distributed ledger technology, and collaborating, not competing, with major financial firms, Mathias says.
To be clear, tokenisation and trading of digital assets using DLT technology would allow for fast, efficient, and affordable solutions, without the need for intermediaries as in traditional banks.
“Today, transferring something that belongs to you always involves a lot of intermediaries and lots of hassle and costs. Also, many of your assets can't even be transferred,” Mathias says.
“However, by leveraging this DLT technology, we can give back some of the control of digital assets to individuals; some assets may still be deposited in the bank because you may not want to take care of all of this yourself, but to be able to enable our customers the ability to transfer anything of value in a more smoother, faster, efficient, and less costly manner is what drives me and the Sygnum team,” Mathias adds.