Banks slowly and carefully reconsider their stance on working with crypto assets. The recent news came from Switzerland, where Swissquote, the digital bank, allowed its clients to participate in ICO crowdinvesting on the company’s platform. They name it the first-of-its-kind case in the world when the representative of banking sector has implemented the open and direct access to the ICO.
“True to our philosophy to democratise finance by offering services that are simple and accessible to everyone, we are now offering our clients the opportunity to help grow start-ups. Combining crowdfunding with the blockchain creates a new form of fundraising,” Mark BÜRKI, CEO of Swissquote, claimed in the press-release.
Crowdinvesting, or ‘equity crowdfunding’, is a procedure of investors contributing money to a business and receiving a small piece of ownership of that business. Its potential is greatest with startup businesses that are seeking smaller investments to achieve establishment. This kind of capital raising scheme allows the private investors to take an early stake in start-ups. Bank clients can buy tokens using Swiss francs from their trading accounts, while Swissquote handles execution of the trade and store tokens on behalf of customers. The service charges 1.25% of the sum contributed.
In the presented case, the account holders of the bank are allowed to buy tokens from Swiss industrial diamond manufacturer, which is raising funds for new machinery: the company manufactures diamonds that are grown in its laboratory. With ICO mechanisms adoption, the clients of the bank got an early access to pre-sale of the tokens. According to the Swiss financial regulator guidelines, these tokens are considered as “payment tokens”. They come with distinctive rights, the investors receive a corresponding share of the money gained from the sale of the diamonds produced. Also, the buyers can hold on to their tokens and wait for them to go up in value, with further sale for a profit at a later date, in case of company’s great performance.
This case can be called successful and legally compliant and is an example of non-blockchain company gaining access to capital with new technology. It is also stated that earlier the bank adopted crypto innovations with the allowance to trade in cryptocurrencies. These kinds of developments can be considered as a result of thaw in banking sphere of Switzerland towards the crypto industry. The understanding of country losing its positions in the attractiveness for the ICOs and crypto startups in general, made regulators and banks act fast during 2018. FINMA issued the license to the Crypto Fund and turned on ‘the green lights’ for the sector to work with the cryptocurrencies. Thus the country followed the path of neighboring Liechtenstein, where the banking sector has been successfully creating a new financial ecosystem during the current year by introducing services for direct and legitimate cryptocurrency investments and security tokens launching.
“Non-mainstream banks are starting to work with crypto funds but by no means is this opening up the floodgates and not a paradigm shift. It is more about brand assurance than deflects from the scam attribute of the sector,” Olinga TAEED, Swiss Visiting Professor in Blockchain at Birmingham City University, still doubts the events to be a certain trend.
However, the mainstream banks are not less interested in ICO procedures. Sberbank, the largest bank of Russian Federation, recently reported in its press-release about the success of a test deal in collaboration with National Settlement Depository (NSD) in attracting the finances through an ICO using the Bank of Russia’s sandbox. The test deal was held in May of this year. Sberbank acted as the coordinator and underwriter of the placement, the NSD was the custodian of the transaction and registered, stored and maintained a record of the digital assets. Andrey SHEMETOV, the Vice President and Head of the Global Markets Department of Sberbank claimed that “Sberbank’s clients are interested in this way of attracting financing and we are ready to provide such a service after the corresponding legislation is introduced, by acting as one of the drivers of institutionalisation and promotion of this type of transaction.”
ICO milestone achieved by banks. Next stop: Stablecoins
The steps of banking institutes towards the adoption of crypto assets and blockchain technologies are obvious. Not a flood actually, yet a small spring by now. The experienced and accurate legacy players are interested in stability, more than in opportunities. Besides, let’s not discard the fact that the cryptocurrency was destined to become a competitor for the banks, not the ally. But things appeared to go slightly the other way. The creation of new instruments allowed traditional institutions to come closer to the wild and unstable crypto market. “The large movers and shakers of the market are now moving rapidly towards tethered cryptocurrencies, i.e. those that are linked to particular countries and their fiat currencies, an early one example is USDT,” says Olinga TAEED.
True, as on November 1, Tether announced it partnership with Deltec Bank & Trust Limited (“Deltec”), a 72-year-old financial institution with headquarters in the Commonwealth of The Bahamas. The bank proceeded with the due diligence review and analysis of compliance processes, policies and procedures during a period of several months with positive results, which led to the opening of Tether’s bank account with this institution.
Meanwhile, Gemini Dollar (GUSD), another powerful stablecoin instrument and Tether competitor, gains momentum. Today, on November 2, the coin was listed on Liquid, one of the world's biggest fiat-crypto platforms by volume, PRNewswire writes. Gemini Dollar has received New York state approval in September of this year. State Street Corporation became the bank to hold the US dollars backing the coin. Tyler WINKLEWOSS, the co-founder of Gemini Trust Co., stated that the currency and its dollar reserves will also be audited every month by San Francisco-based firm BPM to ensure they match.
Professor TAEED observes such signals and the raising interest to stablecoins from another point of view: “The belief that this will be the next big thing is all coming from countries like Venezuela, Argentina, etc — where local currencies are devaluing rapidly. Ironically, bitcoin is considered to be more stable and safe option with no government intervention. We will see new tethered cryptos pop up. The diminishing trust in governments globally is helping to grow this new sector, and that trust is not only in their inability to run a stable financial market due to incompetence, but fear that the value of your saved money and pension can be literally ‘stolen’ from you overnight through government led interventions due to anti-inflationary measures where the individual is a small pawn in a much bigger landscape.” Stable situation within a state requires stable instruments, while turmoiled, pressurized and unstable markets gladly accept new instruments as reserve ones. Banks are also interested in alternate ways of working — the described events depict that banking institutions and cryptos are not the irreconcilable enemies after all.