The sale of Crypto Finance AG is one of the most significant deals in Swiss finance in recent years and an endorsement of the pioneering work done in Crypto Valley, but the fact that this endorsement came from outside Switzerland should give pause for thought.
Jan Brzezek, who founded Crypto Finance with the aim of closing the gap between the world of traditional banking and the digital world of crypto assets, and his team have pulled off a triumph.
Since starting up in 2017, Brzezek has built Crypto Finance into a company, for a majority stake in which German exchange operator Deutsche Börse was this week prepared to pay hundreds of millions of francs.
Closer to 250 Million than 100 Million
According to finews.com’s information, Deutsche Börse paid closer to 250 million francs ($270 million) than 100 million for the two-thirds stake, valuing Crypto Finance Group at around 400 million francs.
A buyout like this is almost unheard of in the Swiss startup scene. Crypto Finance co-founder and Chairman Tobias Reichmuth, however, assured finews.com in an interview that «we didn’t plan the buyout. We were planning a financing round to accelerate our growth in all areas. We’d been in touch with Deutsche Börse for over two years.»
Genuine Achievement, but also Pie in the Sky
In addition to a genuine entrepreneurial achievement there is also a significant element of «pie in the sky» in this valuation. Deutsche Börse is putting all its money on the construction of a «digital-asset ecosystem» despite many voices in international finance who dismiss the boom in Bitcoin, Ethereum and other digital assets as wild and short-lived speculation or even a «Ponzi scheme».
The deal is remarkable in many respects from the point of view of the Swiss financial center or, as it now likes to be called, the Swiss financial ecosystem.
Real Added Value from Crypto Valley
Firstly it shows that the pioneering work in building up Zug’s Crypto Valley in collaboration with entrepreneurs, politicians and regulators has created genuine added value. In its hunt for a tried and tested digital asset player, Deutsche Börse was unable to find anything in Germany or elsewhere in Europe.
Secondly, the takeover has probably raised the valuations of other crypto service providers such as Sygnum and Seba banks – the latter is currently carrying out a financing round – as well as Bitcoin Suisse or infrastructure companies such as Taurus or Metaco.
No Successful Crossover in Switzerland
However, Sygnum CEO Mathias Imbach said the bank was not looking to be bought out. «Sygnum is solidly placed financially and is currently enjoying very strong growth. We shall continue to implement our strategy in the interests of our clients, shareholders and employees,» he said.
Thirdly, it has to be pointed out that the crossover between the old and new worlds is not really happening, at least not in Switzerland. Brzezek told finews.com in an interview just a few weeks ago that a partnership with UBS was «highly plausible».
Hesitancy Difficult To Understand
However, it was not UBS or Credit Suisse or even exchange operator SIX which gained entry to the digital asset ecosystem by buying Crypto Finance, but Deutsche Börse.
Mattia Rattaggi, chairman and co-founder of Ficas, the first company to offer an actively managed exchange traded crypto-currency product, told finews.com he found this hesitancy on the part of Swiss financial institutions toward adopting cryptocurrencies as an asset class as increasingly difficult to understand.
«Particularly if you compare them to major U.S, banks such as Wells Fargo or J.P. Morgan which are already very active in the sector or even with Span’s BBVA which now offers Bitcoin trading in Switzerland.»
More M&A To Come
The fact is that for the top international financial institutions offering crypto clients services and infrastructure involves a great deal of effort. The short cut lies in cooperation and takeovers, which Swiss crypto and blockchain companies are able to offer.
In May U.S. super investor Cathie Wood took a stake in Zug-based ETP provider 21Shares to help enter the U.S. market.
More deals like this would come as no surprise to the Swiss crypto scene. However if the «old» Swiss financial institutions do not move more quickly the best of the country’s «new» institutions may already have been snapped up.
