Through the cooperation with the neobank Seba Crypto, Julius Baer wants to enter the business of digital assets. In an interview with finews.ch, Julius Baer Trade Director Peter Gerlach explains the background to this cooperation.
This quarter is yet to happen: The Neobank Seba Crypto hopes to get soon a banking license from the Swiss Financial Market Authority (Finma).
The approval also marks the start of an earlier announced cooperation between the financial institution with crypto focus and Bank Julius Baer. The latter took part in the emerging company last summer – last month, the bank was also represented on the board of the startup with Peter Gerlach.
Prominence on board
For a long time Julius Baer had a wait-and-see attitude towards the hype topic “Blockchain”. The fact that the bank then invested in the Seba Crypto, of course, has one reason in addition to the prominent participants, as Gerlach, Head Markets and member of the management board, explained in an interview with finews.ch.
“We had a click on a banking license because of the ambition. This is the royal road”, he says in his office in Zurich-Altstetten. “A financial investment alone would not have made a lot of sense for us. That’s why we started designing the cooperation at the end of 2018”.
Crypto startups visit weekly
Even before the Seba founders had presented to Julius Baer in May 2018, the bank would have had opportunities to participate in a crypto startup. “At the height of the hype, we got visits almost weekly,” recalls Gerlach. “There was nothing obvious that we wanted to join. Most projects had no maturity level. The banking know-how was inadequate”.
It was not very realistic for Bär to start a project based on blockchain technology, according to Gerlach, who lacked the necessary know-how. And this is what the traditional bank can now pick up from its partner Seba Crypto.
Four pillars of cooperation
The Finma puts the Seba project through its paces. This, in turn, creates security for Julius Baer in those areas where many banks shy away from dealing with crypto assets: namely in money laundering prevention and in the regulations on how well the bank needs to know about a customer.
Beyond the exchange of knowledge, the cooperation of the institutes is based on four pillars, as Gerlach further explains. The most important aspect is the secure custody of digital assets. This is actually the “central task” of a bank and is the focus of Seba Crypto, as finews.ch has already reported.
In addition, Bank Julius Baer, which itself does not want to haunt any crypto assets on its balance sheet, can refer its own customers to Seba Crypto’s trading and brokerage offer.
Once the digital assets have been safely stored, the investment bankers in Gerlach’s department can also offer structured products on this basis. Thus, Julius Baer would catch up with the Zurich rival Vontobel, which has been offering such vehicles for some time.
Tokenization as a trend
In the longer term, tokenizing assets is hugely important. Such expertise should become even more important in the second half of 2019 – when the Swiss stock exchange wants to launch its digital stock exchange SDX.
“Digital assets as an overarching topic can not be left out as a financial institution”, says Gerlach. “In addition to our involvement with Seba, as a member of the stock exchange, we naturally also follow the SDX project with great interest”.
Nobody has done that yet
Of the possibility of tokenization, the former currency dealer Gerlach promises much. The better flow of information could make huge savings possible, he predicts. On the other hand, it is not yet possible to predict how much customer demand for Seba cryptographic products will be.
“It will now show how much interest there is. Modeling based on interviews and assumptions would not be serious”, he says. “You have to take note, that’s new, nobody has done that in form”.
Also published on Medium.