Two mainstream Swiss financial companies have started offering bitcoin investments to clients. Falcon private bank and online trading platform Swissquote became the first fully regulated Swiss institutions to foray into cryptocurrencies this week.
Zurich-based Falconexternal link became the first traditional wealth manager in the country to embrace bitcoinexternal link on Wednesday after being given the green light by the Swiss financial regulator. Two days later, Swissquoteexternal link said it has teamed up with Luxembourg trader Bitstamp - the only such exchange with a European Union licence for cryptocurrency trading – to offer bitcoin investments for its 303,000 clients.
Bitcoin enthusiasts hopes that its introduction into the established Swiss financial system may signal a shift in attitude – from distrust to acceptance of cryptocurrencies.
“Many investors are interested in cryptocurrencies, but are afraid to trade them because the players in this market are mostly little known and they often require the transfer of funds to a foreign account,” Swissquote CEO Marc Bürki said in a statementexternal link. “As a Swiss bank, we offer our clients a transparent, simplified process without foreign transfers, that is within the reach of everybody.”
Swissquote clients will be able to invest between €/$5 and €/$100,000 with each transaction, but only if they can cover the trade with their own funds (unleveraged).
One cryptocurrency brokerage already well established in Switzerland, Bitcoin Suisse, will provide the underlying structure to allow Falcon clients to invest in bitcoin. The private bank said its new service might expand to include other cryptocurrencies in future.
With the value of bitcoin and other cryptocurrencies soaring in recent months, the bank said it was responding to demand from clients. It has also installed a bitcoin ATM at its Zurich HQ.
One bitcoin was trading at around $650 a year ago, but the price for the cryptocurrency currently stands at nearly $2,400 (CHF2,300). News of spectacular gains in a number of cryptocurrencies has sparked widespread interest in a financial asset that has been declared dead and buried on numerous occasions.
Lucas Betschart, President of Bitcoin Association Switzerland, believes the value of bitcoin will continue to rise in the long-term despite – at times – extreme volatility in the market. The combined worth of bitcoin globally stands at around $40 billion.
“I’m not aware of any other bank where you can hold bitcoins,” Betschart told swissinfo.ch. “This will allow people without technical know-how to hold bitcoins in a secure way. Hopefully it will send a signal to other banks in Switzerland.”
The mainstream banking community has not always welcomed cryptocurrencies with open arms. The decentralised blockchain technology on which it operates is viewed as a rival to the financial system.
Tracking flows of cryptocurrencies on blockchain is relatively simple, but it is not so easy to identify the identities of traders. This has led to concerns about such digital currencies being used for money laundering or tax evasion. This has spooked many Swiss banks that have been already been hit by global crackdowns on tax evasion in recent years. There have been reports of some Swiss banks refusing to accept cryptocurrency traders as clients, according to Betschart.
This makes Falcon’s accepting bitcoin into the traditional banking sector all the more significant. Falcon said it will apply ‘strict know your customer’ protocols to its clients using bitcoin to circumvent identity problems.
A Swiss bank offering bitcoin services is an “historic milestone”, Bitcoin Suisse CEO Niklas Nikolajsen said in a statement.
“Falcon Private Bank is, to my knowledge, the first private bank worldwide to offer crypto-assets directly to their clients,” he said. “A bank offering crypto-assets is a game changer, as it gives institutional clients and high net worth individuals a counterparty in regard to crypto-assets upon which they can rely: a regulated Swiss bank”.
Falcon will now compete for clients with a range of start-ups in Switzerland offering encrypted digital currency asset management services. These include Bitcoin Suisse and other companies such as Melonport that have set up in Switzerland’s growing Crypto Valley based around Zug.
The Swiss Financial Market Supervisory Authority (FINMA) has been taking steps in recent years to reduce entry barriers for financial technology (fintech) start-ups. Last year FINMA created rules to allow financial institutions to accept new clients digitally without the need for cumbersome paperwork and created a new category of license for those that accepted less than CHF50 million in deposits.
FINMA said it would not comment on specific cases but added that it has been in contact with several institutions in the last years in the field of cryptocurrencies. At the end of last year, Falcon had CHF14.6 billion of clients’ assets under management.