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Token provider in check: Sygnum Bank

Sygnum calls itself the “world’s first digital asset bank.” The Zurich-based crypto startup specializes in digital asset management. Customers can store and trade their bitcoin, ether and other tokenized assets on the bank’s own platform. What does Sygnum bring to retail investors?

Sygnum started operations at the beginning of 2020 and already manages more than half a billion Swiss francs. Customers are mainly professional investors and wealthy private investors. They can store and trade their stable coins and tokenized assets with the Zurich-based crypto bank. Sygnum is taking the regulated route: the FinTech has banking licenses for Switzerland and Singapore. The leading markets in terms of crypto affinity have thus been deliberately chosen as locations.

Adapted to legal requirements

Sygnum’s mission: to expand the market for digital assets from these two financial centers. Sygnum is building the financial infrastructure of the future, but embedded in legal and regulatory frameworks in place today. To do this, it has enlisted influential support: former UBS CEO Peter Wuffli is a member of Sygnum’s board of directors. The board also includes Luka Müller, Gabriela Maria Payer, Thomas Buess, Manuel Krieger and Chua Kim Leng. The Sygnum founders have recognized the potential of distributed ledger technology (DLT). And they see the need to connect the unregulated digital asset market with the traditional financial world.

Sygnum wants to create direct access to value

This linkage – Sygnum is convinced – will not only help accelerate institutional adoption of digital assets. The crypto bank also sees this as a way to make markets more efficient and transparent. Above all, however, it wants to create a more democratic investment world in which people would have more freedom – and more direct access to values. At the bank, co-founder and CEO Mathias Imbach is the main advocate of this point of view. Blockchain technology has taken a shine to the strongman at Sygnum. “It’s about giving back control over property and ownership to a broad public. If you roll out this infrastructure all the way, everyone gets access to assets like art or real estate for a moderate amount. That’s where investments are otherwise more likely to start at 6- or 7-figure amounts.”

Small investors are not wanted at the moment

Imbach speaks of a “broad public” that can invest for “a few hundred francs.” But that is exactly what is not possible at all at the moment. Retail investors have no access to the Sygnum offering. “As a first step, we as a bank are focusing on professional and institutional investors,” the bank lets it be known upon request. In other words, only wealthy private investors can buy tokens as customers of the crypto bank. According to the company, however, they are working on opening up the clientele. In the future, crypto-savvy small investors will also be able to benefit from the promised democratization of the investment world, as is the case with Hamburg-based Finexity AG.

Getting involved in the tokenization business

Those who qualify and receive an account can invest with just a few clicks – for example, in fine wines. In February 2021, Sygnum tokenized its first wine portfolio, and a few weeks ago, it tokenized its first painting, Picasso`s Fillette au béret. However, investors should also get access to other asset classes that were previously reserved for institutional investors. “We are currently preparing tokenizations with very different companies,” says CEO Imbach. These are, for example, young companies that need growth capital. Or also real estate companies tokenizing residential or commercial buildings.

Sygnum CEO Mathias Imbach

The point of blockchain is to give control of property and ownership back to a broad public.

Sygnum co-founder and CEO Mathias Imbach (Image: screenshot Eco, SRF)

Investment with risk

Investors must decide for themselves whether the potential increase in value justifies an investment in tokenized assets. Sygnum does not currently provide portfolio advice, Imbach told the press. This means: Basically, investors should consider their risk profile. Those who are not prepared to bear a corresponding risk should not invest in digital assets.

Sygnum AG profile

Year founded
2017
Type of company
Public limited company
Place of foundation
Zurich
Regulatory basis
Banking license Switzerland and Singapore
Share capital new
CHF 37,163,757.54
Number of employees
100
Clients
Large investors, wealthy investors
Source: Sygnum

Pioneers of crypto banking

Sygnum is a pioneer as a crypto bank. In September 2019, the company became the first FinTech alongside Seba Bank to receive a banking license from Swiss financial market regulator FINMA. This was followed a month later by approval as a crypto banking services provider for the Singapore financial market. Since September 2020, it has also been approved to operate an organized trading facility for digital assets (OTF). This paves the way to Signum’s goal: to offer regulated end-to-end tokenization solutions for the entire lifecycle of a security – from issuance to settlement and custody to secondary market trading.

Sygnum shares on its own blockchain

The company is consistently setting the other milestones: first, with Desygnate, a primary market issuance platform. Secondly, with SygnEx, a secondary market trading platform. This makes Sygnum the first bank in the world to offer a fully integrated, institutional tokenization offering since November 2020. Issuers have an efficient alternative to traditional capital raising options such as IPOs. At the same time, they can create a fully regulated, innovative investment opportunity for their investors. Sygnum itself is demonstrating how this can be done: the company tokenized its own shares in January. On Desygnate, digital images of the company’s shares are deposited in a “distributed ledger” – including the associated rights and obligations.

Banking services for ICP tokens

In May, Sygnum announced that it was the first bank to offer custody and banking services for the freshly issued Internet Computer Token (ICP). The “Internet Computer” is the first web-speed blockchain. It supports highly scalable smart contracts. As a result, it not only enables applications such as decentralized financial services (DeFi). The decentralized “Web 3.0” can also map tokenized interactions in social networks in the form of social tokens. In the future, Sygnum plans to offer a range of banking services for the ICP token.

Meeting demand for DeFi tokens

With banking services around DeFi tokens, Sygnum opened the world of “Decentralized Finance” to professional and institutional investors. This is the financial services technology that bypasses traditional financial intermediaries and replaces traditional banking services. Since June, the crypto banking pioneer has offered institutional custody and regulated trading for DeFi tokens such as Aave, Maker and Uniswap. In an initial phase, Sygnum institutional clients can invest directly. They will also have access to various banking services. In perspective, they want to offer a range of DeFi revenue products and services, he said. And develop customized solutions for clients with selected DeFi partners, Sygnum writes in a press release.

Tokenization solutions from Sygnum

Sygnum offers an “all-in-one account solution” for digital assets:

  • Custody: investors can deposit their fiat money as well as their cryptocurrencies, stable coins and asset tokens, just like in a traditional bank.
  • 24/7 trading: customers can trade their digital assets at any time without a financial intermediary.
  • Lombard loan business: Sygnum extends loans to customers against cryptocurrencies as collateral.
  • Tokenization: the bank digitizes assets and makes them transferable.
  • Primary and secondary market trading: the bank’s proprietary platform enables primary market and secondary market transactions.

Using blockchain to limit money laundering

Cryptocurrencies are the future for many. But they also have a reputation for encouraging criminal activity. Blockchain-based business models must therefore not circumvent the tried-and-tested regulatory framework, writes the consumer protection form. This is especially true with regard to anti-money laundering rules, it adds. The anonymity in the blockchain sector entails an increased risk here, it adds Sygnum CEO Mathias Imbach says his bank knows the identity of each investor. In addition, the bank operates under the strict regulations of the Swiss and Singapore Financial Market Authority. He also sees crypto-banking as an opportunity in the fight against illegal transactions, "The beauty of blockchain is that it is transparent. It provides tools to fight money laundering, for example." And it's possible to track where which transaction took place at any time, he said. "You can ask for additional information if you feel something is wrong."

FAQ – Frequently Asked Questions

Is Sygnum a bank?

Yes, but not a traditional one. Sygnum is a crypto bank and has two banking licenses: one in Switzerland and one in Singapore. The range of services does include custody of FIAT money as a traditional banking service. Instead of a traditional current account with EC card, Sygnum customers have a wallet. This gives them access to their assets on the blockchain.

Can I buy tokens from Sygnum Bank as a small investor?

No. Currently, only professional and institutional investors can claim Sygnum’s services. However, the company says it is working on opening up its services to a broader clientele. In the future, small investors may also be able to buy asset tokens from Sygnum.

Is investing in Sygnum Bank asset tokens risky?

Yes, investments in tokenized tangible assets or cryptos are risky per se. There is a threat of total loss, as with other investments. Currently, only high net worth individuals can invest in asset tokens from Sygnum. Investors must decide for themselves whether the potential increase in value is worth the risk of an investment. As an investor, you should always keep an eye on your own risk profile.

Sabine Melichar

Editor | MBA University of Cologne / San Diego State University.
Main focus: Tokenization | Enterprise Digitization | Vocational Education | Society

Sabine Melichar

Redakteurin | MBA Universität Köln / San Diego State University
Schwerpunkte: Tokenisierung | Digitalisierung von Unternehmen | Berufsbildung | Gesellschaft