Switzerland has established itself as the world’s leading location for cryptocurrency companies and services. United under the nickname “Crypto Valley,” numerous companies settled in the small state. But as the example of Swissquote underscores, local firms adapted as well.
The establishment of the first blockchain companies in the Zug area from 2013 onwards laid the foundations for a flourishing crypto ecosystem at an early stage. Policy and regulation provided the necessary legal certainty, some of which is still lacking in other nations today. As a result, the first Swiss banks, including online bank Swissquote, were able to integrate digital asset trading into their offerings as early as 2017. Today, the banking group has over CHF50 billion in client assets under custody, with cryptocurrencies responsible for about one-fifth of its revenue. Head of Institutional Sales Robin Lemann talks to CVJ.CH about the history, strategy and future of digital assets at Swissquote.
CVJ.CH: Since when has Swissquote been involved in the crypto markets?
Robin Lemann: In 2017, Swissquote was the first Swiss bank to give its customers access to the crypto markets. Initially, clients were offered trading and custody of Bitcoin (BTC) and Ether (ETH), and then the offering was quickly expanded to include other cryptocurrencies such as Bitcoin Cash, Litecoin and Ripple. In the following years, the products and the services were continuously expanded. Today, customers can trade more than 34 cryptocurrencies, various ETFs, ETPs and leveraged products on cryptocurrencies, as well as transfer and stack multiple tokens to and from Swissquote.
How did you come to the decision to offer your clients trading opportunities in cryptocurrencies at a relatively early stage?
Since its inception, Swissquote has been committed to providing its clients with transparency, integrity and objective information to enable them to make informed decisions on their own. As such, Swissquote was also the first bank to offer investors real-time access to all securities traded on the Swiss stock exchange. It is in the bank’s DNA to seek out new trends and technologies and make them accessible to its clients. And things have been the same with blockchain and related crypto assets. It was a milestone for the bank in 2017 when it became the first bank to offer the five cryptocurrencies (Bitcoin, Bitcoin Cash, Ether, Litecoin and Ripple) – enabling customers to trade easily and securely in this alternative asset class.
Are these efforts a primary focus or are crypto endeavors merely a side business?
Crypto investments are becoming increasingly popular with private and institutional clients. In 2021, Swissquote posted record earnings of more than CHF 472 million, with the crypto business making a substantial contribution of more than 20 percent to earnings. The crypto business is thus another pillar of Swissquote’s earnings. The range of products and services is being continuously expanded.
What kind of crypto services does Swissquote offer and are there any plans to expand the offering?
Swissquote currently offers more than 34 currencies for trading and custody, and the crypto assets offered are continuously being expanded. Furthermore, Swissquote offers the possibility to transfer cryptocurrencies to and from the bank. Currently, this is possible with Bitcoin, Ether and Tezos. Since the beginning of 2022, customers have been offered the possibility of staking, whereby the offer currently comprises three cryptocurrencies. The next big thing will be its own crypto exchange, which will be launched later this year. Swissquote will operate its own centralized order book with liquidity providers and proprietary market making. Swissquote clients will thus be able to trade existing and additional currency pairs (i.e. BTC/CHF, BTC/EUR, BTC/GBP, ETH/CHF etc.) around the clock (24/7) at attractive conditions.
What are the characteristics of the typical crypto investor on your platform? Is he an active retail trader or more of a crypto saver?
The profiles of our customers are very different. From very active private clients to clients who have added cryptocurrencies to their portfolio as an admixture, to large institutional clients who handle custody and trading through us. Basically, we can say that the average crypto end customer at Swissquote is between 40 and 60 years old and 90% of our crypto investors also hold other asset classes such as equities or bonds.
Why do the established financial institutions in Switzerland remain reluctant to embrace digital assets compared to the established Wall Street banks?
If a financial institution wants to establish its own crypto offering, it has to overcome a number of regulatory, strategic and technical hurdles. Thus, if an institution wants to set up such an offering on its own, it needs a lot of preparation time, know-how and resources. In addition, the subject matter is rather complex and in some cases there is not enough market understanding and technical knowledge available. This is where companies like Swissquote can offer support. As a FINMA-regulated bank, we are able to offer professional support in the areas of trading, custody, legal & compliance and training.
Are financial firms that don’t embrace the new asset class missing out on opportunities?
A firm’s product and service offering is always closely linked to its overall strategy and philosophy. It may well be that it makes no sense for specific financial houses to establish a crypto offering. However, in my opinion, companies in the financial industry should definitely look into the possibilities and opportunities of blockchain and crypto assets.
Are cryptocurrencies an alternative asset class for you?
Crypto assets can make a positive contribution to the diversification of a portfolio in the alternative investment space (however, one should note that crypto assets can be subject to high volatility). There are big differences between the various tokens. For example, there are three types of tokens: payment tokens (such as cryptocurrencies accepted as payment for the purchase of goods or services), utility tokens (which provide access to a digital use or service), and investment tokens (which represent assets such as stocks, bonds, or derivative financial instruments). In the future, it is to be expected that the tokens will then also be reclassified into the respective asset classes according to their categorization. Thus, many new areas of application can be established, but crypto assets do not necessarily have to represent a new asset class of their own.
Are there certain developments in the field that you are particularly looking forward to?
At the moment, very exciting developments are taking place in the areas of DeFi, NFT or Metaverse. I think that the various application areas are still very much in their infancy and that countless new possibilities will emerge. For example, in the area of payments, payment processing, monitoring rights and obligations of specific financial instruments, IoT (Internet of Things) but also in the area of marketing and advertising opportunities. Specifically at Swissquote, I am particularly looking forward to the launch of its own exchange, the further expansion of the cryptocurrencies offered and their transferability, as well as staking. It definitely remains exciting.
Robin Lemann joined Swissquote in November 2021. As Head Institutional Sales, he leads the sales to institutional clients and is additionally responsible for the “Crypto Assets Solutions” area for financial institutions at Swissquote Bank in Zurich. Robin Lemann has more than 20 years of experience in the financial industry. During his career, he has held various senior positions in trading, marketing, sales and distribution at global companies.