28 August 2024
Ian Simpson | 25 min read
Swiss private banks are known for their long tradition of service – and in some cases their agility. Zurich-based Maerki Baumann Privatbank is an excellent example of this. As one of the first banks in Switzerland – and in Europe – to offer crypto services, it got a head-start on the industry in 2018.
But how did Maerki Baumann make the decision to do crypto? How did its service offering develop and what were the keys to success for the private bank, which has been in the business for 5 years and recently launched ARCHIP, a new brand, to support its crypto service offering?
CEO Dr. Stephan Zwahlen spoke to RULEMATCH Spot On host Ian Simpson about all this – and more.
Episode show notes:
(1:31) Intro
(2:22) The backstory of Maerki Baumann’s entry to crypto
(4:01) The original client target group and offering
(5:47) Evaluating the potential offering
(8:25) How the “bridge” between wealth management and crypto formed
(9:09) The positioning of Maerki Baumann among “crypto banks”
(11:42) The generational growth of crypto asset interest
(12:35) Crypto services as a growth driver for the bank
(13:40) Maerki Baumann as a “startup”
(15:11) Agility and partner banks as the key to growth
(16:07) The alternative to size for growth
(16:54) Crypto as a percentage of Maerki Baumann’s business
(19:30) Setting up processes for crypto business
(21:31) Building the Maerki Baumann core crypto team
(23:18) The advantage of due diligence
(24:15) Reducing friction for the end client
(26:39) Risk management with partners
(28:03) The value of partners beyond crypto
(29:01) The growth of Maerki Baumann’s positioning
(30:57) Widening the crypto offering
(33:47) The ongoing fiat/crypto topic
(35:30) Competition in the custody space – and beyond
(40:37) Looking back on the growth of the Swiss crypto ecosystem
(44:02) Can Switzerland keep up?
(45:00) Preparing for adoption of digital assets
(46:15) Final advice to other bank CEOs
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Episode transcript:
Dr. Stephan Zwahlen:
We decided to bring together all our services under that new crypto brand Archip and we decided just to celebrate our 5th year anniversary.
We also invited the 25 most important Swiss crypto entrepreneurs.
People were telling me, “They don’t come and this will be difficult and so on.”
By the end, we organized that event. From the 25 crypto entrepreneurs, 23 showed up.
And in total, 700 people showed up for a party. And it was announced as a crypto party.
There were 200 or 300 traditional clients. There were 200 corporate clients.
There were business partners and so on.
And that’s the story I would tell my colleagues and also my critical colleagues.
We took that decision five years ago and it was also involved with a lot of risks I think.
That event with ARCHIP was for me the proof of that concept.
BEGINNING OF FULL EPISODE:
Ian Simpson:
Hello and welcome to another episode of RULEMATCH Spot On, the only podcast focused exclusively on the institutional crypto and digital assets industry.
I’m your host, Ian Simpson. And if you want to know what banks, securities firms, hedge funds, asset managers and others are doing in crypto and how they’re doing it, this is the place for you.
My guest today is Dr. Stephan Zwahlen, the CEO of Maerki Bauman Privatbank based here in Zurich.
For the past eight years, Dr. Zwahlen has led Maerki Baumann. He previously got his doctorate from the University of St. Gallen, where he is also a frequent lecturer on banking and finance topics.
He is also on the board of various industry associations and organizations, including the Zurich Banking Association. Dr. Zwahlen, welcome to RULEMATCH Spot On.
Stephan:
Thank you very much.
Ian:
So today we’re going to walk through kind of the journey of Maerki Baumann into the crypto industry.
And I think it’s going to be very interesting for our viewers and listeners to understand some of the process that you went through as a bank to start in this business, some of the considerations, and also some of the learnings that you had, which perhaps are useful for other people.
But first of all, maybe just to understand, where did the first idea come from for Maerki Baumann to offer crypto services?
Stephan:
It was actually quite an interesting story. It was a coincidence to be honest.
In 2018, I told my people we need to come up with a statement about crypto because the whole world was talking about crypto and I thought we need to explain what it was and what the position of Maki Bauman would be.
And we made a short presentation. Then there was also an interview that was quoted correctly and then another journalist misquoted the interview because he said that Maerki Baumann was the first bank in the world or at least in Europe to accept cryptocurrencies.
And this was not true at that time, but within a few minutes it went all over the world.
And we were approached by people from the US, from UK, from South Korea, South Africa, from Japan, from all over the world.
And there were actually several hundred requests. And what we did at that time was – we were overwhelmed and we started to analyze what people were asking for.
We identified two potential groups of clients.
On the one hand side, they were corporate clients that asked, “Can we open an account in fiat currency? We are in blockchain/crypto. No bank would offer us an account.”
And on the other hand, we had very wealthy individuals that asked, “Can we get access to this new asset class through your bank?”
So we realized that there was a huge demand.
And in banking, no offering at all.
And that was the point where we started to think about the topic.
Ian:
So you maybe didn’t intend to become famous, but you instantly became famous because of somebody’s mistake.
Stephan:
That’s true. This coincidence actually opened our eyes because we saw there was a huge opportunity, huge demand, and no offering at all.
So we started to read about the topic, but there was not too much to read about.
So we talked to more than 100 people, entrepreneurs, lawyers, consultants, and we identified a lot of risks, but also a lot of opportunities.
And we started to systematically deal with all the risks.
Finally, we came to the conclusion together with the owners, the executive board, the board of directors of our bank that we should go into that topic.
But as we do it always – through a clear concept and a clear strategy.
Ian:
Obviously, you have built up a certain offering and so on. We’ll get to that maybe in just a minute. But you mentioned the two things that people were asking for at the beginning.
How did you evaluate doing those two things for them at the beginning and what were some of the considerations around that?
Stephan:
Well, originally we thought as a responsible asset manager, we need to offer our clients access to digital assets.
So our expectation was after all these talks and considerations that in the long run, digital assets will become part of professional asset management and investment advisory.
So that was the main reason why we wanted to go into that business.
Then, as an opportunistic business area, we also sought corporate accounts.
We actually decided to start with corporate accounts because this was somehow close to what we are doing anyway due to due diligence with new clients and then offer traditional banking services.
But the original main reason to go into that business was to bring traditional clients step by step into the digital world by first investments in cryptocurrencies.
And it proved after one or two years that the other way around would be grow far more and grow much quicker.
These were the corporates, but also the young wealthy individuals that made a fortune with crypto and wanted to diversify and therefore needed access to the fiat world.
And therefore we saw after one or two years significant growth in that area, also in the traditional private banking business.
Because the individuals from the crypto community mainly approached us because they were asking for advice and comes to the structuring and diversification of their wealth.
Ian:
You could actually say that you came at it from the two sides, from your wealth management background, from the corporate services side and maybe learned and taught both sides at the same time.
Stephan:
Exactly. Kind of like a bridge.
That was also the reason why many journalists and also competitors approached me and they asked, “How is it possible and why do you combine as a traditional bank a very new business in the area of blockchain and crypto?”
It proved that we had actually became a bridge-builder between the fiat world, the traditional system, on the one hand side and on the other hand side, the digital world.
Originally, we wanted to bring the traditional clients to the digital world, but the other way around it happened as well. That’s actually the USP we could establish in the last five years to be one of the very only banks between these two worlds and bring people from both sides to one another. It was 2018 when that conversation happened.
Ian:
There was a development into the banking space with crypto…to crypto banks, Sygnum and SEBA, now AMINA Bank.
They have a bit different background, a different approach. And now, actually, if I understand correctly, there are 34 banks in Switzerland that have some sort of offering in the crypto space, which is quite a percentage, quite incredible. How does Maerki Baumann- we’ll maybe backtrack and talk about the development of the services – but how do you position yourself now from where you came from at the beginning, also vis-a-vis the other banks that have now come into the space?
Stephan:
On the one hand side, I would say all the providers from the crypto industry are not really competitors because the core competence of these institutions is actually crypto and they understand that.
And also technology-wise in detail.
We are basically an asset manager that acquired the necessary knowledge to serve clients also coming from the crypto community or serving clients that are coming from the traditional side and are interested in the crypto community.
If you have a look at our offering, it’s very comprehensive and most recently there was a survey, I think, by University of Lucerne and they found out that the Maerki Baumann’s offering is the most complete because it starts with the offering for private clients. You have trading custody of the major cryptocurrencies that we offer together with partner institutions.
Then you have advice when it comes to crypto and digital assets. This means we also have an opinion about the newly established asset class. The third element is we also have discretionary mandate solutions for clients who want to invest a part of their wealth into crypto.
On the other hand, we also have the corporate services. These are corporate accounts with payment transactions.
We give advice to our clients when it comes to liquidity management, when it comes to investment decisions and so on.
So it’s a fully-fledged offering.
What I have been expecting for many years is that banks will all, all banks in Switzerland that are in asset management will start to offer trading and custody of digital assets because they just have to do it.
On the one hand side, you have the longer…the more clients that are interested in it.
And mainly if you have a look at the next and over next generations, for them digital assets is just a normal thing.
I can give you an example.
I have a lecture at the University of St. Gallen and I ask each year who of the around 50 students is invested in crypto or has been invested in crypto.
And it’s usually more than 80 or 90%.
So if you have a look at that, it’s clear that banks also need to offer basic solutions.
If you have a look at the most banks that go into that business now, these are B2B solutions where you can in the meantime quite easily within two or three months offer these services to your clients.
And I think the difference is in our case – it has become a significant profit contribution in the whole bank and it has become part of the whole culture.
It starts with the owner, the board of directors, the executive board, the client advisors, all the departments.
We have a core team, the tech banking team that consists of 15 people. They are doing nothing else but dealing with people from the crypto community.
We have a lot of efforts in our legal and compliance department that would deal with this topic. In the management, it is a very important topic.
So it became part of our business model.
And it’s not just one of several offerings. It’s interesting, as a private bank, and you mentioned the board of directors, also the family and so on, behind the bank – quite a different level than some large international bank, of course, which has advantages and disadvantages as people sometimes know.
Really, you are operating much more like a startup, a sense.
Stephan:
A bank, but a startup that’s very agile and jumping into things. I think we used the last 10 years to transform our bank. We also were a traditional bank with a long history, more than 90 years, but we significantly changed the business model over the last 10 years and we became very agile and I think the cultural point was the starting point.
What you need to know is that our bank is not listed.
It’s a bank owned by a Zurich-based family – family Syz. It is basically two people, Hans Syz and Carole Schmied-Syz.
And they have never been operational bankers, but they are basically entrepreneurs. They are in office at our bank as chairman and vice chairwoman for more than 20 years.
And they give the basis for the entrepreneurial initiatives we take on an operational level.
We have a young executive board, everyone between 45 and 50 years old. We are very close also to the generation that is dealing with digital assets and with technology, but we also understand the old world, which is certainly and will remain the basis of our bank.
And thanks to that setup, I think that was the starting point to become an agile bank.
And what you also need to know is that in 2007, we founded the first transaction bank in Switzerland.
And the reason was that we came to the conclusion that a bank in our size needs to focus on core competencies, which is asset management and investment advisory.
And we wanted to outsource all the volume-driven, highly standardized processes to a specialized company.
And since there was no company that could take over all these processes for a bank at that time, we have founded that transaction bank.
And that gave us the opportunity to overcome that problem of critical size. And strategy advisors have been telling me for many years that a bank in our size has no chance of remaining in existence.
But I always said there is an alternative to size and that’s the business model – to change the business model.
And that’s what we did by outsourcing to this transaction bank because Maerki Baumann became the first client of that transaction bank.
And since then, we tried to innovate and further develop our business model. And in that process, we became as flexible as we are today. And the most important thing, I think, was to develop the culture.
Because on the one hand side you have the conceptual, the intellectual work that needs to be done, but the really challenging thing is to change the culture and change the behaviour and conviction of the people.
Ian:
Mindset.
Stephan:
Exactly.
Ian:
So now five years on since you started with the offering, can you give us a rough idea of how much the crypto business is of the overall business? You say it’s…quite a pretty good profit generator for the bank.
Stephan:
What I can say is that it is a significant part of our profits that comes from crypto.
It’s not so much trading and custody and the discretionary business nowadays, but it’s two revenue drivers.
On the one hand side, it’s the corporate business.
That’s very know-how intensive and it’s a lot of efforts to open these accounts, to do the due diligence, to do the monitoring, serving the clients, but it’s also highly profitable.
And on the other hand, we have the growth in private banking that is not directly related to crypto, thanks to the clients that approach us from the crypto community.
So it’s a significant part nowadays.
Ian:
And growing all the time, suppose.
Stephan:
I can give you two numbers just to get an impression.
We nowadays serve about 500 startup companies from blockchain and the crypto space.
We have more than 200 young professionals that are young investors that came from the crypto community to our bank in order to exchange crypto into fiat money, which requires certainly a lot of thorough analysis.
And we have an increasing number of traditional clients that would make a first step and make first investments in crypto.
Ian:
Okay, very interesting.
Stephan:
I forgot actually the most impressive thing.
We managed over these five years to decrease the average age of our clients by 12 years.
That’s something we had been trying the 10 years before as well with all these next generation projects as all banks would do.
But the problem was always that we could approach young people, but we wanted to approach young, wealthy people.
And thanks to the offering we now have in the crypto space, there are young, wealthy people that are approaching us because they need something that we can offer.
Ian:
So you are fitting very much into the market, product market fit, so to say.
Stephan:
Yes, I believe that that is actually the case.
Ian:
Taking a step back then to just look at how those processes went when you deciding to set this up for the wealth management and then for the corporate accounts.
The first part of the offering at the beginning, can you walk us through some of the steps that you took to assess the risks and the things that you had to think about?
We had recently one of the episodes with Cornelia Stengel from Kellerhals Carrard from the legal side and, of course, they have lots of experience in advising people about what things to look at, but I’m sure you have the first-hand knowledge of those things that you need to understand as a bank to put together an offering?
Stephan:
As I mentioned, first of all, we talked with a lot of people, also with lawyers. We worked together with lawyers and we wrote in depth reports about all the risks. We systematically asked ourselves how can we mitigate the risk or how can we avoid the risk by defining our strategy.
So collaboration was very important, collaboration with traditional institutions but also with the entrepreneurs for example in Crypto Valley and in Zug.
We also worked together with an experienced strategy advisor that had been in blockchain and the crypto business already for four years that also came from the banking industry and together with him, we took three months to work on a strategy that we also discussed with our board of directors and we had a lot of critical discussions and then we started to educate the people.
That was the first step.
And we also started to hire specialists. So mid of 2019, we built the core team of three people.
One was already with the bank, two came from outside. And then together with them, we started to implement the strategy.
Ian:
And there were also certainly technical considerations to offer on the corporate side but then also for eventually the trading and custody.
That’s a big lift as we say for banks to integrate in things.
Stephan:
We also actually as a private bank decided to outsource that to our transaction bank and since the transaction bank was not a specialist in crypto at the time, they work together with Crypto Finance that is regulated securities dealer that comes from the crypto space.
And we then went to the Swiss regulator to FINMA all together, Maerki Baumann, the transaction bank and Crypto Finance, and asked for approval for that first B2B setup in the Swiss banking industry.
And this outsourcing that we implemented already in 2007 reduces complexity a lot for us as a private bank since we do not have to deal with a lot of back office and trading related topics, not with the legal but neither with the technical elements.
And I think that’s also the way that many other banks are going now – through such a B2B setup.
However, what’s important is that you understand also the parts that you outsource very closely.
And this was also a process over the last five years.
We did far more than 1,500 due diligence on these clients. The nice side effect is that mainly if you have a look at these corporate clients, in the due diligence process, they will describe in detail their business models.
So we know exactly what people and companies are working at, what companies are working at technology-wise.
And that’s also a very interesting thing.
And we get to know a lot of extremely highly educated and bright people with a lot of drive and dedication to innovate our market.
It’s very exciting at the same time.
Ian:
Just thinking about the end client when you outsource to these different partners and so on, of course, that takes some of the burden off of you to implement and to integrate and so on.
That can bring different levels of complexity and perhaps friction for the end client.
Is that something that you thought about to try to minimize and how did you approach that?
Stephan
I mean the question we asked ourselves was “What is our differentiation potential or what is the key USP we offer to our clients?”
And to be honest what is difficult is if you have a client coming from the crypto community and he knows how to how to trade these crypto exchanges, he would usually not deal with us because it’s too expensive.
With custody, it has changed over time.
We also have clients from the crypto community that look for a high level of security and use our custody solutions.
But the USP of our bank, where it comes to trading and custody, is that we offer a private client
that is interested in the topic but that is not an expert, the service out of one hand.
And in the background we certainly have partners as we have in other areas as well.
However, the end client has only Maerki Baumann as a client and we would do everything for him.
We would open the segregated account. We would, if he wishes that, manage his discretionary crypto portfolio.
We would do the reporting, the tax reporting and so on.
So it is a service with a very high level of security since we are a regulated bank and it’s offered out of one hand.
It’s a little bit more expensive than if you do it alone.
But it’s the full package from an institution that the client knows and trusts.
Ian:
And when you were evaluating how to set this up fairly early on, if we’re quite honest in the crypto space, there weren’t many other regulated entities, banks and so on wanting to jump into crypto.
Obviously thinking about risk management and counterparty risk and some of those things – was that also a consideration to put one or two levels between in order to minimize the risk for yourselves and for your clients?
Stephan:
It was impressive actually when I announced that we would implement the crypto strategy, reactions were very different.
Reactions from politicians were quite positive. This had also to do with the fact that several entrepreneurs and also industry bodies that had been established quite early started to educate politicians when it comes to the topic.
The reactions from the regulator were neutral, but reactions from competitors were negative or very negative, I have to say.
They could not understand why we would go into that topic and there were arguments like “It’s about fraud and money laundering and so on.”
And the argumentation was not always very differentiated.
And this has changed over the last few years very significantly.
Ian:
I imagine now as more banks come online with offerings, you do become in a B2B setting you’re actually probably working with other other regulated entities more and more often among banks and maybe clients move from one bank to the other or they have two three banks at the same time.
So you are working then with more peers.
Stephan:
That’s true. We are basically very open to work together with other companies.
We proved that when we established the transaction bank, but we also have a corporation with a partners group in the area of private equity. cooperate with Redalpine when it comes to venture capital.
Most recently, we also established a corporation with Bitcoin Suisse, the pioneer among the Swiss crypto companies. So that’s something that is very natural for us to deal with others.
What’s interesting is that clients with larger amounts of money also want to diversify.
And what we observed is that an increasing number of banks and also very reputable banks would accept fiat money that has a crypto background when it came through our bank.
So it seems that the industry trusts that we would do that due diligence in a very good way.
We do that by analyzing four elements to put it simply. Now the first is KYC as in the traditional area. The second is the AML analysis. The third is it certainly needs to be properly taxed.
The money and the forces, it needs to go through a chain analysis.
So each coin, Bitcoin for example, that is brought to our bank is analyzed by partner companies. That level of security, knowing that it came from another bank, regulated at the same level, with the same tradition of professionalism, helps.
And more and more over time.
Yes, this drives adoption and that’s something that can be seen now very nicely.
I mean, you mentioned the 34 banks that are open also to accept that someone buys or sells or sometimes even brings coins. And that’s an important step.
And if you have a look at the PostFinance, that’s quite remarkable. They opened it in their e -banking for the clients, that’s two and a half million clients, if I remember correctly, in Switzerland.
And these are all steps that will further add to the adoption.
Ian:
Definitely. And now just thinking about how the offering has developed, I think you have added some other things, for instance, staking, which also brings other challenges, technically, regulatory -wise as well. How do you continue to evaluate new parts of the offering and who you work with and those further steps?
Stephan:
I think the market is highly dynamic and we expect a lot of further development. For us, cryptocurrencies are just the first representative of digital assets, but by the end everything will be digitalized. All kinds of assets will be digitalized.
be it real estate or non -traditional assets, but also traditional equity bonds and so on. And the reason for that conviction is that blockchain technology is just very powerful. It is much less costly to do transactions. It’s much more efficient. And you can also trade with fractions of certain assets. So I would expect that we are at the very beginning.
And digital assets will become more important.
Ian:
You have added also a staking offering, is that correct? And different things.
What else is coming up or can I ask you that question?
Stephan:
I mean, we most recently established this corporation with Bitcoin Suisse and there basically two arguments behind that.
On the one hand side, we are an asset manager that has proven skills in dealing with fiat money and also with clients from the crypto community.
So what we offer to Bitcoin Suisse is that they can send their clients to us.
They will go through the onboarding process. And on the other hand, we also profit from Bitcoin Suisse.
For example, currently this is from their investment know-how when it comes to crypto.
We established a joint advisory board where we share our views about crypto before we take the investment decisions.
And such a collaboration certainly also helps when you think about future trends, new developments and so on.
I think we as a traditional bank even with experience in the crypto space needs to work closely together with selected partners in order to be or remain at a good point.
Ian:
You’ve mentioned a couple of times the fiat topics – I know early on, and this was also part of the catalyst for your offering, crypto companies who needed access to fiat and then to trading.
Is that still a topic today? The crossover between the fiat and crypto world and how is that developing?
Stephan:
It still is a topic.
Actually, I’m a little bit surprised.
I would have expected a far quicker competition in that area. But I think there are good reasons for many banks to say we do not accept this kind of clients because you need to have the necessary knowledge to do KYC and AML analysis.
And what we observe now is more competition when it comes to plain vanilla corporates that deal with blockchain or crypto.
However, there are also many, actually many complex business models that, for example, involve US dollar clearing that is from a compliance perspective, complex that involves a higher number of transactions and so on.
And in that area, we still have very little competition.
Because by the end, even if you have a look at the market, it is still a niche.
If you have a look at capitalization of crypto in the world, it’s compared to traditional assets, it’s still a niche.
And also if you have a look at the corporates that deal with blockchain and crypto, it’s a number that is not huge.
Very small, in comparison to most other things.
Ian:
You talked about competition and mentioned custody.
That seems to be one area where banks have put a lot of effort into building out offerings. So maybe that is the area where there is most competition, would you say?
Stephan:
Yeah, I think that’s mainly for an asset manager as we are a very interesting spot because there is so many applications with tokens going forward and to have a trustworthy stable institution to store that value is something that I believe is very valuable.
Actually, the interesting thing is when I went for the first time to the Crypto Finance Conference in St. Moritz, people asked me what I was doing there. They were talking about the getting rid of institutions like ours.
And this has actually changed a little bit in the last few years.
And what I expect is kind of a convergence between the traditional financial system and the new technologies that the digital world brings.
These technologies basically put a lot of pressure on established companies to further improve their processes and their services.
On the other hand, they will not replace the traditional financial system.
Regulators and states will not allow for that after they have been building up the regulation in traditional financial systems over many decades.
Now, why are institutions still necessary?
I mean in the transactional business I can well imagine that a lot of institutions will disappear since peer-to-peer transactions might be more efficient.
However, in asset management there is always quite a lot of emotion and sensitivity behind it. And if you have a look at the clients currently, most of the clients that would hold the assets are digital adoptors.
And it will take quite a while until that transfer of wealth to the digital natives will take place. And if you have a look at digital adopters, and I’m also one, I think that in sensitive questions like wealth management, which is the basis for your family and for your existence, the trust in an institution and in a person will for a long time play an important role.
So I think there is also a time component that needs to be taken into account if you have a look at what’s going on in this financial system.
And therefore, institutions that are open to deal with these new technological opportunities will be in place for a long time.
Ian:
And the clients, talking about those who say are less digitally-affine of your clients, but who now understand that Maerki Baumann has quite a sophisticated crypto offering, are trying to understand that, and of course speaking to your client advisors about that, how well are they getting that knowledge and assimilating that knowledge in the portfolio context and so on?
Is that a big jump for them, or is it?
Stephan:
It’s very different, and I think it has more to do with mindset than with age.
We observe a lot of clients, also older clients that are very interested in the topic and they want to be educated and they ask for further information.
However, from having the knowledge about an asset class to take an investment decision, that’s quite a long way.
What’s interesting is we are focusing on not only one generation, but we are always trying to get in contact with the next and even next-next generation, irrespective of crypto.
And that’s currently a very interesting thing. So it can happen that we organize a day where the grandchildren of the clients would come to the bank and then they talk with the client advisor about crypto. And in many cases, they know much more about it.
And that’s something that can also be observed.
Certain generations don’t deal on their own with the new topic or take the investment decisions, but they often involve the next generation that are proficient and interested to discuss about that.
Ian:
Obviously, working with different partners for your offering has been quite key to where you are today. Just talk a little bit about how the Swiss ecosystem, you mentioned regulators, you mentioned other people, the legislatures, politicians.
We often are very happy to talk about the Swiss ecosystem and that is also developing and changing over time.
What has been your experience and how do you see that developing going forward? Also knowing that things in Europe and the US and different places are also changing.
Stephan:
I mean, Switzerland was extremely early by establishing the crypto value and this was actually a corporation between entrepreneurs but also politicians and institutions in Switzerland.
I had always asked myself, how do we bring the Swiss financial center into the next stage?
Because we have a lot of advantages that are related to Switzerland, stability of the political system, the financial market infrastructure and so on.
We have highly educated people, have very renowned universities and research institutions with the hochschule, for example. And the element that was missing was an entrepreneurial spirit when it comes to digitalization – to bring the services, the traditional services into the future.
And I think this was recognized by entrepreneurs but also by some politicians up to the Federal Council that such a fintech and the crypto blockchain hub in Switzerland might also help to bring the financial center into the future.
And it was very impressive to see the reactions from politicians when we announced to go into crypto as a bank in 2019. And it was also impressive to observe that in 2021, one of the most advanced digital ledger laws in the world went through the Swiss parliament with 100 % approval.
So I think we had an extremely good starting point.
And what we are now observing is other hubs that also emerge.
My impression is that mainly Middle East and in Asia, there is now a lot of dynamics. Often, you can read in the media that the US is very cautious when it comes to the topic.
I am very sure that by the end, the US will be one of the leading nations when it comes to digital assets.
They have the most important financial center in New York.
It’s a very important country and if such a new asset class and the new technology that fundamentally changes the financial industry emerges, they will also be involved.
And if you have a look at the major US banks that also applied for a Bitcoin ETF or Ether ETF, that is not a coincidence.
So I think competition, international competition has already significantly increased.
Ian:
And does Switzerland then stand a chance when all of the rest of the world really starts to develop?
Stephan:
Yes, I think so. I think it has a chance as a financial center for asset management in general since it has a very clear and trustworthy regulation.
It has a lot of competent people and education institutions and so on and it has a system that is very reliable and trustworthy.
Mainly when it comes to a custody of assets in combination with the necessary technological know-how, I think we are in a very good position.
However, it needs openness to deal with these opportunities.
And don’t take the foot off the gas.
Ian:
Yeah, that’s true.
Many, many institutions have often, you know, over the past five years, used this phrase, blockchain, not Bitcoin.
Obviously, Maerki Baumann took a bit the other side, right, going directly into crypto, but tokenization, and you mentioned fractionalization and different things digital assets coming forward.
How ready are you for that and even for things which, for instance, SDX may be doing with the development of digital bonds and so on?
How ready are banks like yours for those developments?
Stephan:
We are basically open to deal with these topics. We’re also in close contact with Incore, the transaction bank, about these topics.
We realize that the client is a bit cautious currently and I think it has to do with the fact that you need reliable secondary markets also to sell these to these assets. You need the necessary research competence.
You need to establish new models to value these assets, so I think it will happen, but slower than we maybe originally expected.
One step at a time.
Ian:
Obviously, you’ve taken steps quite quickly at Maerki Baumann and come quite a ways.
I’m sure you’re having conversations with other banking executives and with the people that you work with at the universities and in the institutions – associations, how do you talk to them about these things and what do you say to them?
What advice do you give them from your own experience?
Stephan:
The interesting thing is in the first two years when we went in that business, many people were laughing a bit about our strategy.
Then two years they were rather quiet and now they want to have an exchange of thought, even much bigger institutions as we are.
My suggestion is always to be open, to be open when it comes to new technologies, even disruptive technologies, not only see the risks and cannibalization potential but also the opportunities and also to show openness when it comes to corporations, because banks will not be the ones that are in technology, the leading institutions.
And what I would also tell them is one very nice episode from this March when we launched our new crypto brand ARCHIP.
ARCHIP consists of “Arch” that represents the ‘bridge function’ that we have as a bank and the “chip” that represents the technology orientation.
We decided to bring together all our services under that new crypto brand ARCHIP.
And we asked ourselves, how can we promote that?
How can we launch that without a big amount of money for promotions?
And we decided just to celebrate our 5th anniversary.
And we also invited the 25 most important Swiss crypto entrepreneurs. And people were telling me, don’t come and this will be difficult and so on.
By the end, we organized that event.
From the 25 crypto entrepreneurs, 23 showed up.
And in total, 700 people showed up for a party.
And it was announced as a crypto party.
There were 200 or 300 traditional clients. were 200 corporate clients.
There were business partners and so on. And that’s the story I would tell my colleagues and also my critical colleagues.
We took that decision five years ago and it was also involved with a lot of risks, I think.
But that event of that ARCHIP launch was for me the proof of that concept.
Ian:
Definitely a milestone.
Very, very good. With that, think we’ll wrap things up.
It’s been very interesting to speak about all of those experiences.
I know that this isn’t the end of the story.
More things are coming up and some things which I think you are developing now and perhaps in a few months or a year or so we’ll be able to talk about even more.
We look forward to that.
Thank you very much.
Stephan:
Thank you very much, Ian, for the invitation.