CEO Mathias Imbach, spoke to finews.com about how Sygnum has managed to keep assets under management stable during the crypto winter and why it has stepped into the metaverse. 

Those entering Sygnum's metaverse hub in Decentraland will be greeted by its capable receptionist CryptoPunk #6808, a non-fungible token (NFT) the bank acquired around a year ago.

Blockchain-based Decentraland is the place for financial players to be these days, with Sygnum opening shop in the same virtual space as JP Morgan, which launched its Onyx lounge earlier this year. 

Once there, clients will benefit from Sygnum’s research on topics such as NFTs, visit an art gallery, and a virtual exhibition hub.

Learning By Doing

For Sygnum, which has had a Finma license for three years now, the rationale behind entering the metaverse came from wanting to be part of the learning curve. «If you believe in it, you have to be there early and make sure to be part of that interaction,» Sygnum co-founder and CEO Mathias Imbach said.

While he admits that the metaverse is still in its infancy, he sees mixed reality gaining strength in the next few years as financial services acknowledge the potential of developing their own sales channels there.

The New Rolex

Linked to the attractiveness of the metaverse is the desire for individualization, which is the same both in and outside the metaverse, «people want to be different and express it,» Imbach said.

This is the key to understanding a new paradigm of digital versus analog. Fueling this change is a younger generation of gamers, keen to build their social status in a virtual world, «like bankers with their Rolex watches,» he added.

Staying Decentralized

Although central platforms such as Facebook are already promoting the metaverse, Imbach pins his hopes on the decentralized Web3 community prevailing, with its goal of strengthening peer-to-peer ownership and keeping value creation within the networks, instead of it being sucked up by central players.

Yet the scene is still very small and highly fragmented and will probably take more than five years before these worlds are frequented by hundreds of millions of people.

In the meantime, Imbach sees NFTs, which represent scalable single-ownership uniqueness, as being at the center of the hype. «Innovation requires exaggeration sometimes,» he said, adding «the hype is often followed by tears, and after two to three years one sees what remains and is truly innovative.» 

Crypto Winter

While the current crypto winter drowned some of the unregulated crypto companies and caused serious outflows from others, Sygnum is one of the players benefiting from the current «flight to quality,» Imbach said. Resilience in the face of those turbulent waters is something Sygnum has been able to demonstrate this year.

Due to its steady intake of new assets this year, the bank was able to make up for losses from deteriorating asset values and dwindling custody fees.

Real World Assets

Sygnum has maintained assets under management at around 2 billion Swiss francs and expects inflows of hundreds of millions of francs from various projects by the end of the year, Imbach said.

Part of the fourth quarter inflows will come from a partnership Sygnum has with Maker, the decentralized finance lending protocol. Maker, which is also the issuer of stablecoin DAI, sits on $7 billion in total locked assets, some of which it wants to invest in traditional assets to diversify. 

As a licensed crypto bank, Sygnum is assisting Maker to invest $250 million of those assets into BlackRock's iShare ETFs. Paradoxically, the transaction seems like a fund flow reversal, as funds usually flow from traditional finance into crypto, not the other way around.

Bitcoin Burn

Furthermore, after its last financing round in January which generated $90 million, Sygnum could go on for more than two years under the current adverse market conditions, Imbach said.

The focus is currently on obtaining further regulatory approvals in Luxembourg and Abu Dhabi financial free-zone (ADGM) and, with respect to the latter, setting up a branch there. That would be in addition to its current operating locations in Switzerland and Singapore, which are equally represented in Sygnum’s management.

Imbach sees regional consolidation gaining momentum, but says Sygnum still has the ambition to grow organically. Still, he does not entirely rule out some form of a merger in the future.

Moreover, adding businesses across jurisdictions gives the company a good global perspective on regulation in different countries, where he sees coordination increasing.

DeFi's Next

Within Swiss crypto regulation, there are outstanding specifications related to the legal framework for decentralized finance (Defi), the structuring of digital assets, and broader access for banks to crypto assets. Failing to close these gaps within a reasonable timeframe, could lead to Switzerland losing its head start in comparison to the US and others, he said.