Julius Baer is joining up with aspiring «neobank» Seba Crypto to tackle digital assets. The Swiss bank's chief trader, Peter Gerlach, tells finews.com how.
Seba Crypto hopes to win Switzerland's first banking license as a crypto firm – as early as this quarter. The permit will mark the starting gun for a partnership with Swiss wealth manager Julius Baer, one of the first traditional finance firms to seek an entry into the world of cryptocurrencies through a partnership.
Julius Baer's long-time trading boss, Peter Gerlach, who joined the start-up's board last month, is the driving force behind the Swiss bank's softening towards digital assets.
«Their ambition for a banking license clicked with us. That's the silver bullet», Gerlach told finews.com in an interview. «A financial investment alone wouldn't have made sense for us. That's why late last year, we began constructing a cooperation.»
Weekly Crypto Calls
Even before Seba's founders knocked on Julius Baer's door last May, the bank had options to get into a crypto start-up. «At the peak of the hype, we had visitors practically every week», Gerlach said. «However, there wasn't anything obvious for us to cooperate on. Most of the projects weren't mature enough, and the banking know-how was inadequate.»
Julius Baer didn't think it was realistic to launch its own blockchain technology project, Gerlach said, because the bank didn't possess the necessary expertise. By contrast, Seba Crypto, led by ex-UBS banker Guido Buehler and backed by 100 million Swiss francs ($100 million) from prominent investors, does.
Storage as Basis
Swiss regulator Finma's evaluation of Seba's adequacy for a banking license lends Julius Baer comfort where many banks have shied from thus far: anti-money laundering checks as well as identifying the source of funds and spotting ill-gotten money.
The bridge to exchange knowledge between traditional finance and crypto upstarts is based on four pillars, Gerlach said. Julius Baer views the key pillar as the secure storage of digital assets – this is the «central task» of a bank, and is the focus for Seba Crypto, which in turn is working with financial security specialist Loomis.
Vontobel's Pioneering
In addition, Julius Baer – which doesn't want any crypto assets on its balance sheet – can refer its clients Seba's trading and brokerage activities. Once the digital assets are securely stored, Gerlach's investment bankers can begin designing structured products on them. The move would put Julius Baer on equal footing with Vontobel, which has already broken ground.
Various players in the Swiss market have thrown their weight behind the tokenization of assets. The Swiss stock exchange operator SIX plans to launch a digital pilot exchange dubbed SDX in the second half of 2019.
«Financial firms cannot ignore the wider issue of digital assets», said Gerlach. «Besides our work with Seba, we are following the SDX project with great interest.»
Client Demand for Crypto?
A former foreign exchange trader, Gerlach views tokenization of existing assets as very promising. A more efficient trickle of information will enable enormous savings, he predicts. He is coy on how big demand from clients for Seba's crypto products may be.
«It remains to be seen how much interest there is. It wouldn't be serious to model it based on interviews and assumptions», he said. «We have to acknowledge that this is new – no one has ever done this before».
