Published: November 28th, 2020
Gazprombank, the third-largest bank in Russia, has obtained approval by Swiss authorities to start offering crypto-related banking services. The bank’s Zurich-based subsidiary said this week that it had received permission from the Swiss Financial Market Supervisory Authority (FINMA) to provide custody of cryptocurrencies as trading between crypto and fiat currencies.
Roman Abdulin, CEO of Gazprombank’s Swiss operation, said in a statement that approval by from FINMA ‘marks a significant milestone,’ explaining that the bank sees enormous opportunity in digital assets as their role in the global economy grows. Staking out a strong position in crypto services will help the bank gain new clients, he said.
In a press release announcing FINMA’s approval, Gazprombank Switzerland said its new package of crypto services would include purchase and sale of bitcoin, along with institutional-grade storage solutions. The bank also has plans to grow its offering gradually to add other cryptocurrencies, alongside an expanded range of crypto products and services.
Any new services will be subject to a rigorous evaluation process, the bank said, and that the new services only be available to a select group of institutional and corporate clients initially. Clients gain trusted access to cryptocurrency liquidity, Abdulin said, and relax in the confidence of knowing their cryptocurrencies are in the care of a Swiss-regulated bank.
‘That limits counterparty risk.’
Switzerland has established a strong reputation in crypto circles as an innovator in blockchain technology and a trailblazer in regulatory support for cryptocurrency adoption.
Approval by FINMA for Gazprombank’s crypto-related services offering comes off the back of a wide-ranging set of financial legal reforms passed by the Swiss Bundesrat in September.
Known as the ‘Blockchain Act’, it sailed through parliamentary approval unopposed and is expected to take effect in January or February.
When it was passed, the head of Switzerland’s Blockchain industry association claimed that it would give Switzerland a regulatory framework that could be the most advanced of any western country.
In addition to new crypto services, Gazprombank Switzerland also announced this week that it had joined OpenVASP, the industry association dedicated to improving regulatory compliance in the virtual asset service provider (VASPs) market.
Launched in late 2019, OpenVasp aims to support virtual asset service providers grappling with anti-money laundering regulations across Europe and elsewhere. In its announcement, Gazprombank Switzerland said it was the first traditional Swiss bank to join OpenVASP, along with industry leaders like local crypto bank Sygnum, and Swiss crypto broker Bitcoin Suisse.
Joining OpenVasp burnishes the bank’s reputation as a leader in Switzerland’s growing crypto services market, which focuses on family offices, HNWIs and institutional investors.
Gazprom Switzerland has been preparing for the rollout of new cryptocurrency services in the country since the middle of 2018.
And it’s not the only Russian financial institution vying for a place in the overseas crypto and blockchain-related services market, and leveraging Switzerland as a lunch point. Sberbank, Russia’s biggest state-run bank, joined the Hyperledger platform for blockchain-based commodity trade finance through its Swiss subsidiary in August.
The thirst for overseas expansion in crypto may be driven in part by the legal and regulatory limits Russian legislators have placed on domestic crypto use. Russian lawmakers passed the Digital Financial Assets (DFA) bill in July that recognises the legal status of major cryptocurrencies like BTC, but bans them from being used for payments.
Russians now have the legal right to buy and hold BTC and other major coins for investment purposes, however, lawmakers are keen to stop crypto for being used for tax avoidance, with significant fines and even jail terms proposed for anyone caught making large, undeclared crypto transactions.
Investors seem eager to get a foothold in Switzerland’s burgeoning crypto space. Despite pandemic-driven market upheaval, Swiss crypto firms have been firmly on the financing radar.
Earlier this year Swiss crypto exchange Bitcoin Suisse secured USD 284 million in a pre-money valuation.
In a statement confirming the seed capital round, the company said it wanted to bring its total capital up to USD 104 million by raising an additional USD 47 million. At the time it had secured USD 20.5 million from a group led by Roger Studer, former Vontobel head of investment banking.
A month earlier, Zurich-based crypto-asset manager Crypto Finance AG raised USD 14 million of its own in a Series B round led by Swiss investor Rainer-Marc Frey and Lingfeng Capital, along with a consortium of smaller investors.
The company said the new financing would enable it to expand its products and services in Asia, where its working banking clients on asset tokenization and other innovations in blockchain-based financial services. Crypto Finance AG is also waiting for FINMA approval to trade in derivatives.
Taurus Group, another crypto infrastructure startup, raised USD 11 million in March through a Series A round.
Arab Bank Switzerland led that round in partnership with a consortium including real-estate group Investis, Swiss private banker Lombard Odier, and the Tezos Foundation.
Growing investor interest in the country’s crypto-focused financial services sector lies in contrast to waning enthusiasm for Swiss blockchain startups. According to the Swiss tech association, year-on-year venture capital moves in Q1 2020 declined by CHF 100 million over the same period last year. Analysts have blamed investor restraint on pandemic-related uncertainty.
Measures by the Bundesrat to shore-up traditional small businesses amid coronavirus lockdowns have seen money that might have gone to fund startups routed elsewhere.