The Swiss financial regulator has issued two approvals for a national cryptocurrency investment fund and a national digital asset custody service, just days after the Chinese central bank claimed that bitcoin and other financial blockchains posed a threat to economic stability.
The Federal Financial Market Supervisory Authority (FINMA) has officially approved the Crypto Market Index Fund – the first investment fund of its kind in Switzerland – after careful consideration of its potential to “facilitate serious innovation … always technologically neutral ”.
In a related development, SEBA Bank, a Swiss bank specializing in digital assets, said the regulator had granted it a new CISA license to act as an institutional-grade “custodian bank for Swiss collective investment schemes”.
SEBA Bank Managing Director Guido Buehler said the new license will allow Swiss mutual funds to offer investors direct and liquid exposure to cryptocurrencies, something they previously could not do due to stringent requirements placed on fund managers to oversee custody solutions.
“Institutional investors such as banks and insurance companies are now ready to invest in crypto assets,” Buehler, a former senior executive at UBS, the Swiss investment bank, told me by email.
“They prefer to invest through a fund wrapper which has a higher level of safety and regulation. There is institutional demand for crypto investments, but there was previously no custodian bank solution available until now. With this missing gap being closed, we expect demand to increase significantly. “
FINMA said the new Crypto Market Index Fund is only allowed to invest in “established crypto-assets with a sufficiently large trading volume”. It will only be open to “qualified investors” and all activities of the fund must be carried out through “established counterparties and platforms that are based in a member country of the Financial Action Task Force (FATF)” – the intergovernmental agency created to fight against money laundering.
SEBA’s digital wallet – which is already open to private and institutional clients outside of a fund wrapper – facilitates trading of 11 cryptocurrencies: bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Stellar ( XLM), USD Coin (USDC), Bitcoin Cash (BCH), Synthetix (SNX), Uniswap (UNI), Yearn.Finance (YFI), Chainlink (LINK) and Aave (AAVE).
The bank allows customers to put their crypto-assets in a cold room – a form of safekeeping that involves exporting private keys to hardware devices that are not connected to the internet and therefore cannot be hacked.
The devices are stored in a Faraday cage shielded against radio frequencies in a safe protected by several biometric access controls.
Switzerland has one of the largest banking sectors in the world, accounting for around 25% of all cross-border asset management worldwide. The country also has the highest proportion of millionaires on the planet, with 15% of its adult population worth over $ 1 million.