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institutional trading environment . “ The other interesting dynamic is if you look at things like the private equity area and the other alternative vehicles , the majority of the papering in those particular spaces give the opportunity to pay now in digital or cryptocurrencies . If you look at the legal frameworks – which go up to 10 years – most of them include this type of asset class as a potential distribution method . So someone may invest in a private equity fund and get paid in a cryptocurrency under the terms of their LPA .” The banks said they expect to begin operations in London in 2021 subject to registration with the UK Financial Conduct Authority ( FCA ), all applicable regulatory filings and customary closing conditions . At launch Zodia will provide custody services for the most-traded cryptocurrency assets – Bitcoin , Ethereum , followed by XRP , Litecoin , and Bitcoin Cash – which represent the majority of client demand and activity , accounting for approximately 80 % of the total assets – equivalent to $ 395 billion – traded on the top cryptocurrency exchanges . In time , we may look back to the early days of cryptocurrencies and view the hacks , the scandals and the volatility as a thing of the past . But for now , custodians will have to deal with questions – like mine – around the surprise that banks are delving into a somewhat unregulated , retail-heavy phenomenon associated with many negatives and positives . For Manson , it ’ s about blocking out that noise and focusing on the facts , he explained . “ You need to make that distinction . Noise emanates from someone who lost their bitcoin because their hard-drive went missing , or someone using coins on the darkweb ,” he highlighted . “ And the element of noise is a result of the fast growth of the asset class , it ’ s important when you ’ re creating these businesses not to be distracted by the noise , but you need to think independently to make a good thing . “ There ’ s an element of not wanting to wait and see and follow , and actually start . You associate banks with safety and to some extent with compliance , and they are two big themes in cryptocurrencies . The other one is of course financial crime compliance , and in both cases , what it takes is implementing security and compliance matters consistent with how we do things in our financial institutions .”
Switzerland is establishing itself as the home for digital assets and custodians are taking note
Swiss regulators have created an environment for established securities servicers to launch their institutional crypto custody endeavours , putting it in “ pole position ” in the race to mainstream digital assets , experts believe .
A report from research firm Aite Group highlighted the progress from Switzerland ’ s regulators in their openness towards blockchain transactions and cryptocurrency custody and trading , putting it ahead of rival locations – Lichtenstein , Luxembourg , Singapore , and Malta – in their view .
The report stated that the Swiss regulator has found “ a window for innovative and future-oriented financial institutions to begin to integrate cryptocurrency trading and custody into their business models .” Speaking with Global Custodian , two banks setting up crypto custody offerings in the region have echoed the praise for the Swiss Financial Market Supervisory Authority ( FINMA ).
In December , BBVA announced its intentions to launch services around the purchase , sale and custody of digital assets through its Swiss subsidiary as another securities services provider delves into the institutional crypto world .
“ Switzerland is one of the most advanced ecosystems in crypto assets ,” said Javier Rubio , head of business development at BBVA in Switzerland . “ Since the early beginning , Zug ( a small town near Zurich ) attracted relevant initiatives in the crypto space . Nowadays this is one of the most important hubs of innovation in the cryptoworld and it is named as the ‘ Crypto Valley ’. A big representation of the largest foundations such as Ethereum , Tezos or Carando are headquartered in Zug together with an ecosystem of around 900 companies in the area of Zurich , Zug , Lucerne and Lausanne with different fields of specialisation .
“ Government and banking regulator ( FINMA ) is seeing this space as an opportunity for the country to position itself as an innovative financial market centre and are supportive for Banks entering this business . In Switzerland , our bank has all the necessary licences to conduct this business activity .”
The Spanish bank said that its offering responds to the growing demand from highly knowledgeable investors who were already operating with these digital currencies through FinTechs and start – ups . At first , BBVA will only manage transactions and accounts with Bitcoin , but said it plans to expand the offer to other digital assets over time .
“ There seems to be appetite to invest in crypto as an asset class ,” added Rubio . “ As of today , we see traditional institutional investors like investment funds , venture capital and asset managers investing already in some crypto assets .
“ At the same time , we see a lot of interest coming from private banking clients who are looking for portfolio diversification . Offering this service stands as an opportunity for BBVA Switzerland to enrich its value offer and grow a new client base of high-net-worth individuals .”
Meanwhile , one of the first custodians to reveal its intentions around creating a cryptocurrency ecosystem was SIX Swiss Exchange , back in 2018 .
Under the new leadership of former R3 Lab and Research Centre chief , Tim Grant , the project has been moving along behind the scenes to drive its plans forward . Recent announcements have included an investment in Custodigit , the joint venture created by Swisscom and Sygnum in 2018 , to support the complete investment value-chain for digital assets .
The purpose is to provide market access to digital assets , and settlement and custody services for their institutional clients through a new digital asset gateway .
When asked if Switzerland has set itself apart as the number one place for digital assets in Europe , and even the world , Grant told Global Custodian : “ That ’ s a clear and unequivocal yes .”
He added : “ There is a basic underlying attitude by all branches of the Swiss legal and political system to accommodate new technological developments under the current law . This includes central government and local governments ’ legislative , administrative and judicial branches .
50 Global Custodian Spring 2021