Company Profiles

SEBA Bank Benefits As It Straddles Traditional And Crypto Worlds

Tom Burroughes Group Editor 18 August 2023

SEBA Bank Benefits As It Straddles Traditional And Crypto Worlds

We talk to the CEO of a Switzerland-headquartered bank with international reach and ambition. With turbulence continuing in the world of digital assets, and a complex regulatory landscape, the firm argues that it is well placed to capitalise.

It is an understatement that the cryptocurrency and digital assets space has faced problems in recent years. With the FTX collapse and legal consequences, the implosion of some “stablecoins,” and the US SEC’s charges against cryptocurrency exchange Binance – life has been difficult. 

In all this furore, straddling traditional banking and digital worlds, and operating in the more liberal and stable jurisdictions for digital assets, is a bonus. That is the boast of SEBA Bank, an organisation headquartered in Zug – part of Switzerland’s “crypto valley” – with a licensed business in Abu Dhabi, UAE, and an office in Mumbai, India. It also opened a Hong Kong subsidiary office in November 2022. At the time of writing, SEBA (Hong Kong) Limited has been in discussions with the relevant authorities in Hong Kong about securing a licence. 

Demand is so strong for a bank that can onboard “crypto natives” as efficiently as traditional clients who want a piece of the digital assets pie, that it is proving quite a challenge to keep up, Franz Bergmueller, SEBA’s chief executive, told this publication in a call.

“More people are knocking on our door than ever before…the funnels of people who want to bank with us are wide,” Bergmueller, who joined the bank in April 2022, said. “People are crying out for accounts and access to services.”

“We are probably the only bank that does crypto and digital banking,” he continued. SEBA does not have a retail offering. Clients must have the status of accredited investor, or the equivalent. It also conducts commercial and institutional business and works also on a B2B basis with other banks, asset managers, miners of cryptocurrencies, family offices and many more.

In today’s world of tight compliance and risk management, SEBA Bank must be “super careful” with its checks, he said. But that quality control is also an important hallmark of the bank, he continued. One benefit for SEBA, Bergmueller said, is that contrary to predictions of how banks will be disintermediated in a new digital world, the need for institutions with a balance sheet and expertise is as strong as ever.

Digital ferment
There is little doubt that the wealth sector is showing lots of interest in the space. A survey of family offices around the world by BNY Mellon Wealth Management, published in March 2022, found that 77 per cent of them have some interest or involvement in cryptocurrencies. In its annual wealth report of 2022, Knight Frank said that 60 per cent of respondents to its survey cited blockchain technology as an increasing opportunity. It found that clients ask for 1 to 5 per cent of their portfolios to be in cryptos. 

SEBA’s Zug home base is a powerhouse. There were about 1,128 blockchain companies in Switzerland and the neighbouring principality of Liechtenstein at the end of 2021. The Swiss government implemented the legal basis for distributed ledger technology in 2021 and for listing security tokens on regulated secondary markets. (See related stories about Switzerland's digital assets industry here and here.)

A 2021 Goldman Sachs survey found that nearly half the family offices it conducts business with want to add digital currencies to their stable of investments, with the closely held firms seeing crypto as a possible hedge for higher inflation and prolonged low interest rates. Almost half of respondents to that Goldman Sachs report said that they are thinking of moving into digital assets such as bitcoin, although most are not currently in this space. Their main reason for caution is that they are sceptical of whether cryptocurrencies are a store of value. (Goldman Sachs polled more than 150 family offices.) Major institutions, including JP Morgan, Morgan Stanley, Julius Baer, Guggenheim Partners, and others, are involved. SC Ventures, Standard Chartered’s innovation and ventures unit, partnered with Northern Trust to launch Zodia, a cryptocurrency custodian for institutional investors.

Types of clients
SEBA plays to two broad types of clients: Traditional high net worth individuals (HNW) who want exposure to digital assets, and expertise and help, and “crypto natives” who are deeply immersed in the field and need a bank and state-of-the art facilities. With traditional clients, SEBA keeps the language as clear and free of tech jargon, as possible, Bergmueller said. "Crypto “natives” tend to be younger, and often frustrated by what’s on offer in the mainstream banking sector. “They are totally under-banked and treated like criminals. They want a bank account, custody, loans for this space, and so on,” Bergmueller continued.

A driver of business, among others, is that HNW clients already involved in alternative assets look at digital assets as a diversifier, he said. In regions such as Asia, digital tokens such as non-fungible tokens (NFTs) are popular, he said. 

Proving use
A priority for SEBA and the wider financial sector is proving the use case for digital assets/cryptos. Although there are clearly strong reasons for crypto to be included in any diversified investment portfolio, the case needs to be made more and more, Bergmueller said. 

One use case is how, in a time of unprecedented central bank stimulus – now being reversed in certain countries – and instability in certain nations, there’s enthusiasm for alternatives to fiat currencies, he said. “Most digital natives believe that they [cryptos] are [a store of value] for the medium term.”

Another use case is that cryptos make it easier and cheaper for people, including those from low-income groups, to efficiently send money across national borders. “This space could add value,” Bergmueller continued. Tokenization of otherwise hard-to-own assets can widen access and participation in markets by a wider population. 

However, in other areas, Bergmüller is a sceptic – he isn’t convinced about the use cases for a) inflation hedge and b) bitcoin as “digital gold,” because bitcoin and gold have proven to be largely uncorrelated.

So far, the crypto/digital assets space tends to favour newer, less established financial institutions rather than incumbents, he said. And it works to the advantage of a firm that has deep expertise and experience in how cryptos work. “You need to be forensic, to check sources of wealth. Leveraging blockchain-based finance solutions is something that many [firms] cannot do and other institutions are now asking us for help,” he said.

Bergmueller agrees that firms such as SEBA are part of a new face of Swiss banking – a sector that has been through its fair share of turmoil and change in recent years. And outside of the Alpine state, Bergmueller said he is optimistic about Hong Kong, which he said is determined to gain a competitive edge, along with Abu Dhabi and Dubai.

He’s even quite complimentary about the European Union, arguing that the Markets in Crypto-Assets Regulation (MiCA), taking force in June this year, creates a level of clarity, and capacity for “passporting,” which should prove beneficial for the sector’s growth. 

If Bergmueller is even partly right about the EU, and other developments, SEBA Bank is going to have an interesting story to tell in the coming years.

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