Swiss digital bank Swissquote is allowing clients to participate in initial coin offering (ICO) crowd investing schemes via its platform. Account holders will be able to buy tokens from industrial diamond manufacturer LakeDiamond, which is raising funds for new machinery.
ICOs took off last year as a means for start-ups to raise capital from the general public by issuing cryptotokens in exchange for investments. In the first five months of this year alone, ICOs raised $13.7 billion (CHF13.6 billion) according to a study from PwC and the Crypto Valley Association. In Switzerland, that figure reached $456 million between January and the end of May, compared to $1.46 billion for the whole of 2017.
The capital raising scheme is designed to allow the general public to take an early stake in start-ups. But participation requires knowledge of cryptocurrency technology, particularly how to store and trade tokens. Some ICOs accept traditional currencies from investors but many prefer cryptocurrencies such as bitcoin or ether.
Swissquote’s service, which charges 1.25% of the sum contributed by investors, aims to open up the ICO market to more people. Bank clients can buy tokens using Swiss francs from their trading accounts, while Swissquote will handle execution of the trade and store tokens on behalf of customers.
Swissquoteexternal link claims to be the first bank in the world to offer clients such direct access to ICOs. “True to our philosophy to democratise finance by offering services that are simple and accessible to everyone, we are now offering our clients the opportunity to help grow start-ups,” stated CEO Mark Bürki.
The bank already allows clients to trade in cryptocurrencies, a service it says boosted earnings last year. LakeDiamond has been selected as the first ICO to be offered to its clients.
Lausanne-based LakeDiamondexternal link was founded in 2015 as a spin-off company of the Federal Institute of Technology (EPFL). The young firm manufactures diamonds for industrial use that are grown in its laboratory in machines it calls diamond reactors.
The company aims to raise CHF60 million to add 50 new reactors to its production line. Each LKD token will be priced at CHF0.55 and will go on general sale early next year. Swissquote clients will get early access to pre-sale tokens from Monday.
Novel use case
Marketed as a payment tokenexternal link using Swiss financial regulator guidelines, LKDs come with distinctive rights for holders. Investors can use the tokens to buy minutes of time on the company’s diamond reactors and receive a corresponding share of the money gained from the sale of the diamonds produced during that period.
LakeDiamond says it takes approximately 462 machine hours to grow a rough diamond out of which it can cut a one carat Round Brilliant.
Or if they prefer, holders can hold on to their tokens in the hope that they will go up in value if the company performs well. In this case, tokens could be sold on for a profit at a later date.
LakeDiamond believes its market could potentially be worth CHF18.4 billion by 2022. Its diamonds are used in the production of robots, watches, lasers, high power transistors and magnetometers. “Our ICO intends to provide LakeDiamond with the resources needed to accelerate the pace of its development and expand its leadership in lab-grown diamonds,” stated founder and CEO Pascal Gallo.