REGULATORY COMPLIANCE AND INSTITUTIONAL-GRADE SECURITY ARE BEING BUILT INTO DIGITAL ASSET SOLUTIONS DEVELOPED JOINTLY OUT OF SINGAPORE AND SWITZERLAND.
THE WORLD’S FIRST digital asset bank, Sygnum, a joint venture between Singapore and Switzerland, is up-and-running.
Sygnum aims to be a bank to crypto-currencies in the manner that traditional banks service depositors of physical or “fiat” currencies.
Sygnum can, in fact, accept fiat currencies to enable institutional investors to access crypto-currencies for investment.
Today, the global universe of all crypto-currencies amounts to more than US$246 billion.
Yet, till now, there has been no regulated depositary or custodian for digital assets — or cryptocurrencies, as they are more popularly known. The upshot is that hundreds of millions – even billions – of dollars is believed to have been scammed.
As recently as August, Australian police charged five people over a cold-call cryptocurrency investment fraud. The Australian Competition and Consumer Commission’s Scamwatch says investment scams involving Bitcoin and other crypto-currencies increased markedly in 2019.
And according to a new report by CipherTrace, so far in 2019 cybercriminals have been able to syphon US$4.26 billion from crypto-currency users and exchanges.
Sygnum has built a system that will provide institutional-grade security, having co-developed its regulated custody solution with Swisscom, a leading player in banking infrastructure.
In August, Sygnum received a Swiss banking licence, and in October a capital markets services (CMS) licence from the Monetary Authority of Singapore.
Gerald Goh, Sygnum co-founder and chief strategy officer, says: “Regulatory compliance and oversight in two global financial hubs – Singapore and Switzerland – form the strong foundation on which Sygnum is building its business.
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Sygnum Head of Asset Management, Stefan Mueller, says: “With the CMS licence, Sygnum can now conduct asset management activities in Singapore, and will focus primarily on digital asset investment strategies for institutional investors.
“The CMS licence is an important milestone in the establishment of our asset management arm, leveraging the vibrant financial environment in Singapore.
“This is complementary to our banking services in Switzerland, and will benefit our Swiss institutional and private qualified investor clients.
Mueller told ATI: “The CMS licence we were granted is for asset management activities. It is different from a banking licence, which has its own application process.
“At this point, our focus is to establish our business as an asset manager in Singapore, and to develop compelling, high quality digital asset investment products.
“Our current focus in Singapore is to develop high quality digital asset investment products which provide a
responsible and prudent way for accredited and institutional investors to access this space.
“We believe that digital assets are the foundation of tomorrow’s economy, with greater transformational power than the internet in enabling all kinds of new business models.”
Sygnum aims to help clients construct broader, more diversified portfolios, with reduced risk and institutional-grade trust. store, trade and manage the digital assets Bitcoin and Ethereum and convert fiat currencies such as Swiss francs, Singapore and US dollars and euros into the two crypto-currencíes.
It will also offer custody brokerage and tokenisation of services for digital assets to qualified investors and institutions.
“We believe our multi-manager product approach is a very compelling way for professional investors to gain exposure to this emerging new asset class,” Mueller says.
The firm’s first product is a multi-manager fund known commonly as a “fund-of-funds”, which allocates investments across a portfolio of managers that tap into the global digital asset opportunity, using different and uncorrelated investment strategies.
Mueller says: “The Sygnum multi-manager fund was launched on November 1, 2019 and we have already made our first fund investments. Subscriptions can be made directly to the fund.
The bank will be able to issue, store, trade and manage the digital assets Bitcoin and Ethereum and convert fiat currencies into the two crypto-currencies
“As a CMS licensed asset manager operating out of Singapore, the Singapore market is a key focus for us. However the fund is available to accredited and institutional investors globally, subject to compliance requirements.”
The next step for Sygnum is hopefully to achieve a full banking licence in Singapore to complement its Swiss banking licence.
Sygnum needs both licences to provide a full suite of services.
As a bank, the company will be able to issue, As the digital asset ecosystem grows, many experts are asking how traditional asset managers will respond to the paradigm shift that is under way in how they store and transact securities.
The founders of the firm believes hedge funds, family offices, mutual funds, pension schemes and other financial professionals are poised for the perfect moment to enter the digital asset space.
The firm is the brainchild of Goh, formerly with the global firm Cambridge Associates, and Mathias Imbach, who was general manager at RNT Associates in India, Ratan Tata’s personal investment platform.
The management team is backed by an executive board steeped in distributed ledger technology (blockchain) and traditional finance.
Sygnum is also able to draw on the wisdom of an advisory council of big names, including Philippe Hildebrand, Vice Chairman of BlackRock, Peter Wuffli, former UBS CEO, and Ang Kong Hua, Chairman of Singapore’s Sembcorp Industries and a member of Singapore’s GIC board.