Keynote Speech by Dr Stephan A. Zwahlen

“Crypto Valley Summit” in Zug from 30 August to 1 September 2021

“Dear colleagues

I am honoured to be able to give the keynote speech at this renowned crypto conference tonight, as a representative of a private bank. The memory of attending a Young Presidents’ Organisation (YPO) event in March 2018 remains fresh in my mind. Daniel Gutenberg, the successful Swiss angel investor, had invited Niklas Nikolajson, the founder of Bitcoin Suisse, to take part in a live interview at Zurich’s Volkshaus. That was the first time I had been able to have a deeper insight into the topics of crypto and the blockchain. The vivid descriptions of the entrepreneurial work carried out by Niklas and his team impressed me.

It also became clear to me that this was the start of a new technological trend in the financial sector, one which had the potential to spark major changes.

Around six months later, I was asked a question about cryptocurrencies in an interview. I replied that Maerki Baumann would, in principle, be open to taking in fiat money as long as the wealth’s origin could be determined beyond any doubt. Back then, we had already started to receive some initial enquiries on the subject, and when a request came in, we worked with specialist third-party companies to clarify it as required. My statement was picked up by numerous media outlets, and, as luck would have it, was depicted inaccurately by an online portal that reported Maerki Baumann had become the first European bank to accept cryptocurrencies as assets. The news spread around the world like wildfire, and we received more than 400 responses in just a few days.

There was no chance of stemming the tide of the misinformation, so, instead, I commissioned an analysis of the addressees and the content of their enquiries. 60% of the responses had come from Switzerland, 20% from the USA and 20% from Asia. Most of them were asking about the possibility of opening a corporate account at Maerki Baumann or investing in crypto. The media also showed keen interest, albeit on the basis of erroneous information. I was invited to conferences in the USA, South Africa, Japan and South Korea. Even the government’s Blockchain Task Force, Swiss party leaders and regulators’ representatives got in touch. Amazingly, the bulk of the 2 responses were positive, although many of my colleagues in our sector adopted a cautious, sceptical or even furious, stance towards our open-minded approach.

We quickly realised there was huge demand for crypto services, but there was next-to-nothing on offer in this space, particularly in the banking sector. As a result, Maerki Baumann’s Board of Directors and Executive Board decided to draw up a comprehensive crypto strategy. We developed this strategy with the assistance of numerous discussions with entrepreneurs, experts and lawyers, plus external support, then put it into practice step-by-step from the start of 2019 onwards.

By establishing a crypto desk and successively building up expertise in our IT, compliance and risk management departments, as well as our client units, the crypto business has now been firmly anchored within our company culture.

Its synergies with private banking, which we suspected might exist from the start, have indeed shown themselves to exist. But more on that later.

To start with, we deliberately set our sights on corporate clients. We could not understand why start-ups using blockchain technology or active in the crypto business were scarcely able to build up a relationship with a bank, as far as fiat currency went. Back then, lots of companies had to head to Liechtenstein for this, even though their business activities themselves were focused on Zug’s Crypto Valley. Alongside the business potential we anticipated, this situation itself spurred us on to offer them a suitable service. Since then, more than a hundred blockchain firms and crypto companies have built up a banking relationship with Maerki Baumann. Alongside basic services in terms of payment transactions, we also offer investment-related services, such as assistance with ICOs, STOs or IEOs.

I see it as a blessing for Switzerland as a financial hub, in particular, that our country is now home to almost a thousand new companies involved in crypto and the blockchain. Why? Because one of the core challenges over the next few years will be integrating the potential offered by technology into banks’ business models in a profitable way.

Technologies like the blockchain, along with artificial intelligence, quantum computing and robotics, doubtless have the potential to place existing business models and institutions in jeopardy.

Even the adjustments of the past 15 years have led to 60 of the original 160 Swiss private banking houses disappearing. The structural changes on the horizon are likely to be even more hard-hitting. Switzerland welcomes innovation with open arms, and, thanks to its outstanding education and research institutions like the Federal Institutes of Science and Technology in Zurich and Lausanne, seems predestined to support this technological transformation. Stakeholders in Crypto Valley and elsewhere are promising major stimuli on an entrepreneurial level, and banks can benefit from them, too. As a result, 3 I am not expecting to see the major technological innovations taking place in established banking houses: I am expecting to see them at fintechs. These enterprises can collaborate with banks, and in return, benefit from this trust-based relationship and the access to their high-net-worth clients.

As part of our corporate client business, we perform extensive due diligence checks for each arrangement, with these checks always representing the foundation of our decisions on whether to enter into a business relationship. Our specialists have already carried out several hundred discussions and analysed countless innovative business models involving the blockchain or crypto. We are often impressed by the entrepreneurial spirit, the strength of innovation and the skill that has developed at the gates of Switzerland as a financial centre within the briefest period of time. However, I am surprised by the scepticism that still often comes to bear in the banking sector. In my view, this is likely to primarily be connected to the fact that people still have little knowledge and experience of the new trend. The impressive performance of Bitcoin Suisse’s business, the fact that Sygnum and SEBA have received banking licences, the recent sale of a stake in Crypto Finance to Deutsche Börse, and the strong performance of many cryptocurrencies are powerful symbols that have led to increased acceptance.

As far as investments go, Maerki Baumann offers private and institutional clients alike the opportunity of investing in popular cryptocurrencies or tokens. Our clients have been able to trade and deposit cryptocurrencies since last year, and this year, we are integrating investment advice that encompasses both traditional and digital assets.

With the recent launch of our first crypto asset management solution, we are also offering an actively managed asset solution for clients interested in investing part of their wealth in digital assets.

Why? Because we believe that cryptocurrencies or digital assets will, in the future, be a core component of investment advice and asset management. There is no doubt that the high volatility of cryptocurrencies will put a dampener on the establishment of this new asset class. That said, this phenomenon will lessen as more institutional funds with a long-term outlook flow into this market.

Of course, blockchain technology and its array of applications in decentralised finance pose a threat to begin with, which may explain the initial reluctance on the part of some established providers. However, the longer you spend delving into this topic, the clearer it becomes that the blockchain and crypto primarily represent an opportunity for investors and financial service providers. Cryptocurrencies are merely the first representative of the digital assets that will appear in much more multi-faceted guises in the future – both in the world of business and society at large. For example, smart contracts promise enormous gains in efficiency across a whole host of areas. 4 Blockchain-based applications can simplify all kinds of repetitive tasks. In addition, the tokenisation of analogue assets will also enable less wealthy clients to invest in asset classes like real estate, art or intellectual property rights, thanks to the option to invest in fractions.

The synergies I have already mentioned also work in favour of traditional private banking. We are delighted to be in regular contact with Ultra-High-Net-Worth clients and their family offices or attorneys, who are looking for a crypto-based solution. These points of contact have also given rise to attractive additional traditional private banking business opportunities, time and again. In addition, we see it as a particular testament to our services that entrepreneurs from the crypto community, who often take on substantial business risks due to their involvement, want to draw on our asset management skills. The crypto expertise we have built up in our private bank over the years creates an ideal framework within which to recognise and appeal to the needs of this category of clients. Ultimately, we are proud to be able to use our private banking services to support an array of visionaries and figureheads within the crypto scene.

The establishment of digital assets as a new asset class will forge ahead, driven by numerous innovative firms in the crypto community and the ecosystems that are coming into being. The conditions for this are positive: from a global perspective, the topic is on everyone’s lips, market volumes have already reached a sizeable level, there are numerous entrepreneurial initiatives to be seen, the initial regulatory framework has been created in many judicial areas and the search for new investment opportunities is a top priority. The latter is precisely because of the high valuation of traditional investment classes and the low-interest-rate environment. But there is still plenty to do: the unresolved regulatory questions need to be cleared up on a supranational level, trustworthy secondary markets need to be constructed, professional research skills need to be established and the tension with the trend towards sustainable investment needs to be probed. Let us approach these challenges together!”

Zurich, 30 August 2021