Bitcoin Suisse should be exceedingly pleased with itself. Instead, the most successful crypto-broker in Switzerland seems hampered by strategic, quasi-existential questions. One of them is whether it should apply for a banking license or partner with a bank.

Bitcoin Suisse's business is booming. The Zug-based crypto-broker reported net profit of over 24 million Swiss francs ($26 million) in the second half of 2020, while increasing the level of digital custody assets to over $6.5 billion.

With more than 250 employees, it is no longer even small. And it is preparing for a public security token offering as a way of raising additional funds after amending its articles of association to allow its shares to be tokenized.

Valuation Up Significantly

But it is probably going over the books and re-calculating what its tokens are worth after Deutsche Boerse took over competitor Crypto Finance for around $435 million. This more than likely had a large impact given Bitcoin Suisse's most recent valuation from last December was for roughly the same amount.

But numerous conversations between finews with insiders and sector experts shows a different picture. A source close to the situation told finews Bitcoin Suisse's management apparently disagrees about the company's future direction as do its largest shareholders following the withdrawal of a banking license application with Swiss financial regulator Finma.

No License More Freedom

Others say there is no disagreement but prolonged discussions about Bitcoin Suisse's strategy. The question is whether they should continue to make the effort to get a banking license or whether it, as a self-regulated entity, wouldn't have more operational freedom without one.

One of those strongly in support of a banking license is Niklas Nikolajsen, who wants to make Bitcoin Suisse independent of custody banks and offer derivative trading and lending services. He also fears that the major Swiss banks could enter the crypto-business at some point, endangering Bitcoin Suisse's market leadership.

Knocking at Julius Bär's Door

CEO Arthur Vayloyan feels the one way road to a Finma license is too risky. It would have to closely examine all client relationships in order to fulfill Finma's anti-money laundering requirements and that could take time. The crypto-markets, on the other hand, move fast.

That is why Vayloyan is looking at partnerships. According to finews.ch, Vayloyan found a willing listener in Julius Bär. But the Zurich-based private bank is already doing business with Seba and it holds a stake in the business.

Vayloyan didn't want to talk to finews given it is too early. A spokesperson, however, confirmed: «A banking partnership is among the strategic options that are being considered.»

Tata at the Core

There is a large consensus internally that Bitcoin Suisse needs to upgrade its compliance and IT systems to that of a bank. According to information provided to finews, Tata Consultancy Services is implementing a core banking system. It has not been an easy process given the compliance work being undertaken on its client base while it continues to onboard new clients at an accelerated pace.

Even if Bitcoin Suisse continues to strive for so-called "bank readiness", or full compliance with all the regulations and requirements for a banking license, taking that approach is only "one of many strategic options", the spokesperson said. As the operational business shows, "our model functions very well without a license.»

Still Comfortable

Bitcoin Suisse is still in a very comfortable situation. But this is continually changing given the further institutionalization of the crypto-business. That means that a broker such as Bitcoin Suisse is not likely to be able to continue making as high margins as it has in the past.

Whatever the case, the company will increasingly resemble a bank, either through a partnership or when it submits another Finma application.