The Crypto Finance Group has issued an online ‘paper’ entitled Why every bank will need a crypto-asset strategy. This is a big claim, albeit from a source with vested interests (see below). That does not stop it from being of interest.

As Rupertus Rothenhäuser, CEO of Crypto Broker AG (part of the Swiss Crypto Finance Group), says: “it’s now possible for banks to shape a crypto asset strategy within the regulated finance sector.” He suggests this can be based on a suite of crypto-asset financial services like those the Crypto Finance Group provides its professional investors.

Every bank will need a crypto asset strategy

A new asset class is emerging – crypto-assets. Crypto-assets are an asset class designed for the latest digital turn of the wheel. Bitcoin – and other crypto-assets – first attracted retail investors and now have engaged the attention of institutional investors. The attraction – crypto-assets often enjoy a freedom from the policies of central banks and governments. Some will argue that they also embrace blockchain technology as a way of reshaping the future of finance.

In the Crypto Finance Group’s words “We live in an age of digital disruption that has accelerated over the last year. Central banks are unleashing record levels of monetary stimulus, while technology continues to rapidly reshape our global economy. It has shown us that conventional thinking will not bring the answers for what lies ahead. In the midst of this change, crypto-assets are emerging as a ‘safe-haven’ asset for institutional investors looking for alternative stores of value for their investment portfolios.

Banks will, therefore, need to both create the infrastructure for crypto-assets and respond as trusted advisors to clients who are interested in investing in this asset class. This creates a challenging duality: the current financial system remains, and this new digital asset finance sector emerges. Securing the expertise of specialised partners for trading and investing in crypto-assets, and developing a digital asset strategy, is one approach to satisfy the need for innovation (one which Crypto Finance Group says it would be happy to provide).

The challenges banks face, at least according to Crypto Finance Group

As crypto-assets become more established, there will be a significant increase in the number of transactions involving them. As this happens, banks will also face many challenges. First, they will need to build the infrastructure required to support crypto-assets (which is different from that needed for traditional finance). This will require expertise.

This also means addressing cost pressures. Banks will need to run existing banking systems in parallel with new technologies for many years to come. By partnering with crypto-asset knowledgeable firms (which Crypto Finance Group suggests it is), banks can obtain access to established crypto-asset infrastructure, including trading and settlement capabilities.

In addition, banks will also have to create access to cryptomarkets. They will need products and solutions which enable customers/clients to invest. In effect, banks will need offerings for different types of customers/clients who want to invest in crypto-assets. This may even lead to tokenising assets so that customers/clients can make tokens:

  • bankable and tradable
  • a way to raise finance.

Enterprise Times: what does this mean

In the view of Crypto Finance Group, Switzerland is one of the few countries creating a positive environment for crypto-assets. With a new DLT law addressing crypto-assets – effective from February 2021 – it argues Switzerland delivers regulatory clarity – which coincides with the Crypto Finance brokerage receiving a securities house licence from Swiss regulator FINMA. In turn this ‘explains’ the ‘paper’ Why every bank will need a crypto-asset strategy.

Yet, beyond the self-promotion, there is a more serious point – even if it butts up against the views like those from the Bank for International Settlements. With Tesla recently buying US$1.5B in Bitcoin, investor and venture capitalist Tim Draper holding 30,000 Bitcoins and JP Morgan joining the bandwagon, the likelihood is that others will feel obliged to follow suit. All of which would seem to reinforce what Crypto Finance Group asserts. Can banks afford to be left behind?

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Charles Brett is a business/technology analyst consultant. His specialist areas include enterprise software, blockchain and enterprise mobility tech (including metering). Specific industry sectors of interest and experience include finance (especially systems supporting wholesale finance), telecommunications and energy. Charles has spoken at multiple industry conferences, has written for numerous publications (including the London Times and the Financial Times). He was the General Chair of the bi-annual High Performance Systems Workshop, 2005. In addition he is an author and novelist. His Technology books include: Making the Most of Mobility Vol I (eBook, 2012); Explaining iTunes, iPhones and iPads for Windows Users (eBook, 2011); 5 Axes of Business Application Integration (2004). His published novels, in the Corruption Series, include: The HolyPhone Confessional Crisis, Corruption’s Price: A Spanish Deceit and Virginity Despoiled. The fourth in The Corruption Series - Resurrection - has is now available. Charles has a B.A. and M.A in Modern History from the University of Oxford. He has lived or worked in Italy, Abu Dhabi, South Africa, California and New York, Spain, Israel, Estonia and Cyprus.

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