Bitcoin Suisse is gearing up for the next bull market by reinventing itself as a full-fledged “crypto asset manager” and wealth advisory firm serving a growing breed of ultra-high-net-worth individuals and crypto-curious institutions.
The strategy includes a comprehensive digital asset gateway effort from the Swiss Financial Market Supervisory Authority (FINMA), Switzerland’s financial regulator, as well as expanding operations to the European Union, the United Kingdom and the United Arab Emirates.
It is led by CEO Dirk Klee, a banking veteran who previously headed Barclays’ wealth management and investments division. In a wide-ranging interview with me at Bitcoin Suisse’s headquarters in Zug, near Zurich, Klee acknowledged that the recent turmoil in the crypto markets, including the collapse of high-profile platforms FTX, Bittrex and BlockFi, has been a “major setback.” institutional acceptance. Retail investors have lost billions of dollars in cascading bankruptcies, sending shockwaves through the industry and drawing the ire of global regulators.
Even so, Klee said institutions are looking beyond the pain and focusing on the long-term potential of cryptocurrencies and blockchain technology, meaning that the “washing out” of bad actors should ultimately be a “good thing” for mainstream adoption prospects. .
“Institutional players should be safe havens,” he insisted.
“So with the eruptions that we saw in 2022, institutions focused on how to properly manage risk; who are the trusted partners? how deep do I have to go into the technical details to understand the dynamics?
“All the problems with FTX were really problems with TradFi (traditional finance). misappropriation of client funds; improper risk management; trade versus client interests and so on. Basic institutional standards were not met. So I think now institutions want to go deeper. They want to do their due diligence. They want to fully understand how [crypto companies] work; what we deliver; how we were created; we are safe And that’s a good thing. In 2021, there was an uproar. the market was advancing and the weaknesses of some players were exposed. I believe washing is a healthy development.”
Klee added that bitcoin, which reached an all-time high of nearly $69,000 in November 2021 before falling below $15,500 last year, may now be at the bottom of the market cycle. And, he predicted, the next uptick is likely to be characterized by “less volatile, more stable” growth, which he attributes to a combination of regulatory oversight and the end of bubble-inflating, ultra-low interest rates.
Bitcoin was trading at just over $30,500 at the time of writing (June 30, 2023), marking an 84% year-to-date gain.
“Regulators have really stepped into this space,” Klee said, welcoming legislative changes in Switzerland as well as the EU’s new Crypto-Assets (MiCA) markets. “They provide secure rail guards for wider adoption and access to crypto.
“And the other thing is that a few months ago, [Western economies] left the 30-year cycle of lowering interest rates and cheap money poured into the next higher risk asset class… That money is no longer available. Investments are getting tougher for companies in this industry and we need to prove that we have a sound business model. Operators become healthier as a result of better risk management, hopefully, and protocol use cases become clearer. Records must also prove that they actually represent value.
“The hype and money that was flying in advertising has stopped. Now it’s getting real.”
Paying for fancy watches, not coffee
One of the popular arguments against bitcoin is that it’s not “real money” because you can’t buy anything with it, and to a point, Klee may have to concede that argument.
Crypto payment services are still a relatively important part of the business, pale in comparison to its trading and custody offerings. While Bitcoin Suisse now facilitates such payments for several hundred merchants, as well as the cantonal government of Zug, which allows residents and local companies to pay their taxes in bitcoin, Klee admits that adoption has been “slower than many expected.” waiting.”
When asked if he thought bitcoin would ever become a widely accepted medium of exchange, the CEO said it could only happen “as a result of wider public acceptance of crypto.” Still, the number of merchants signed up to Worldline Crypto Payments, the payments service launched by Bitcoin Suisse and Worldline, grew last year despite the downturn, with high-end retailers showing the highest interest.
“The idea of bitcoin as a means of payment for smaller transactions has not materialized,” Klee said. “It’s not developed for everyday use like buying a coffee at Starbucks, it’s not, but it’s used a lot in the luxury sector.
“If you are staying at a premier hotel in Zurich, The Dolder Grand or The Chedi in Andermatt, you can pay your hotel bill with Bitcoin. You can buy Swiss luxury watches with Bitcoin or higher end cars… This is where we see adoption. It comes from crypto natives (people who are well versed in blockchain technology) who have a lot of crypto and want to buy things with it. But, again, we’re seeing this more for luxury goods than for retail and generally higher value transactions.”
He continued. “I think where crypto payment services will ultimately play a bigger role is in e-commerce and the metaverse. Here’s where it’s going to happen. That would be with your local butcher. Probably not.”
Referring to Bitcoin Suisse’s main source of income – trading and custody services for wealthy individuals, family offices, asset managers and corporations – Klee noted that the company already has clients from all over the world except America, but that is limited by Reverse. Claim rules that prevent him from targeting anyone outside of Switzerland.
“They can get to us,” he shrugged. “But we are not active outside of Switzerland. We do not market to or actively target customers in these countries.”
That will change under the new business plan, with one foreign subsidiary already based in Liechtenstein, the crypto-friendly, super-rich microstate wedged between Switzerland and Austria, and medium-term plans for expansion into the EU, UK and UAE.
Liechtenstein’s office must play an important role in securing a place in the EU, Klee said, warning: We are reviewing the requirements and preparing for it.” Although it is not a member of the EU, Liechtenstein enjoys unrestricted access to the bloc thanks to its inclusion in the European Economic Area (EEA), a benefit that Switzerland does not share. Meanwhile, the UAE is fast emerging as the Middle East capital for blockchain innovation, attracting offices from Western crypto companies, including Switzerland’s only certified crypto banks, Sygnum and SEBA Bank.
Unlike those local competitors, however, it is notable that Bitcoin Suisse has not yet received a license from FINMA.
Klee attributes this to the difficulty of retroactively applying banking rules after ten years of operation. “We are an existing, large, complex business,” he noted. “So it’s a long way for us to become a fully regulated entity in Switzerland.” Sygnum and SEBA Bank, by contrast, took a “greenfield approach” to building governance frameworks first and customers second. cap, claiming it would be a “strong reputation positive” and “help us work better with industry partners”.
As a sign of his resolve on that front, he pointed to this year’s joint development of a crypto-compatible banking platform, TCS BaNCS, by Bitcoin Suisse and Indian conglomerate Tata.
And while a FINMA license could be useful in the UK, Klee hinted that there are bigger hurdles to overcome in that market.
Protecting consumers or stifling innovation?
“While we would be very happy to expand into the UK, we want to make sure that, you know, we’re welcome there,” he said.
“What I have noticed, based on my experience in the UK, is that the UK’s view of crypto is heavily driven by consumer protection. The point of view is as follows. “Is this like gambling? Does it attract customers to risky investments?’ And I think it’s fair to be cautious. But I would also argue that investing in crypto offers a lot of opportunities, especially for people who may have little money. [of capital] but through crypto can directly participate in the technological revolution as I would call it.
“It’s an opportunity you shouldn’t miss.”
Repeated attempts by this reporter to raise criticism of the Financial Conduct Authority (FCA), the UK’s notorious anti-crypto financial regulator, have been unsuccessful. The FCA has a long-standing policy of admonishing consumers that they will “lose all your money” if they buy bitcoin. As a result of these warnings, many UK banks, including Klee’s former employer Barclays, are blocking their customers from transferring money to crypto companies.
Instead of criticizing such practices, Bitcoin Suisse takes a more diplomatic approach, acknowledging the need for risk management while standing by Switzerland’s famously liberal attitude.
“Obviously you have to be knowledgeable and well-led and nothing should be advertised,” the chief executive said. “However, the consumer protection aspect has not been the only factor in Switzerland. We’re looking more at innovation, the potential that cryptocurrencies and blockchain can bring, and the potential to have a competitive edge in the financial markets… So if you ask me if the UK isn’t there yet, I think what it needs to do the industry. to do is to provide more education. Cryptocurrencies need to be better explained. It is a risky asset class, yes, but there are other risky asset classes and they have been adopted over time.
“I just hope that people are free to choose. They should be given that opportunity. The real question is, “How can you access crypto securely?” And if there is regulation, I think it will be good for consumers.”
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