Recently, many Swiss banks have expanded their service portfolios by integrating digital assets with the Zuger Kantonalbank taking up the lead among the state banks. Jan Damrau, Head of Corporate Governance, explains how this decision came about.
In August 2023, Lucerne Cantonal Bank (LUKB) made headlines by announcing a comprehensive crypto offering scheduled for early 2024. It was the first Swiss state bank to announce digital asset services. Just two months later, Zuger Kantonalbank (ZugerKB) beat their Lucerne counterpart to the punch with launching crypto trading. In November, St. Galler Kantonalbank (SGKB) followed suit.
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CVJ.CH: ZugerKB was the first cantonal bank to launch a crypto offering. How did this come about?
Jan Damrau: For a Zug based bank, it makes sense to consider digital asset products and services. The development of the offering was ultimately driven by the explicit desire of many of our clients for a secure and simple custody and trading solution for cryptocurrencies. ZugerKB's client advisory, product management and trading departments worked closely together to meet this client demand. We are of course pleased to have been able to launch such an offering for our clients ahead of other banks.
Did the Luzern Kantonalbank's announcement in August speed up the launch of your services?
No, the Luzerner Kantonalbank announcement had no impact on the timing of our launch. The project was already well advanced and the launch was firmly planned for autumn. Our goal was not to be the first bank on the market, but to offer our customers the simplest and safest service possible.
Did the location in the heart of Crypto Valley make it easier to coordinate with partners?
We are well connected in the Crypto Valley and are also a member of the Swiss Blockchain Federation. The crypto-friendly environment allowed us to closely follow developments in the digital asset space over the past few years. However, for coordination with our partners Swisscom and Sygnum as well as the authorities, the location was not decisive.
Currently, six cryptocurrencies are tradable through ZugerKB. Why the choice of these assets?
We currently offer clients the opportunity to invest in Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Polygon (MATIC) and Uniswap (UNI). These coins are among the most widely used cryptocurrencies. We have chosen them based on their market capitalisation, liquidity and client demand. If we see strong demand for additional currencies, we will expand the range of tradable assets accordingly.
Has ZugerKB's crypto offering attracted particular attention from a particular client group?
Interestingly, we found that both younger and older clients show interest in the cryptocurrency offer. Many of them are tech-savvy and open to new forms of investment. At the same time, they want a safe and convenient way to invest in cryptocurrencies. Our offering addresses this need by providing a user-friendly and secure trading platform. It seems that the appeal of cryptocurrencies is age-neutral and appeals to a wide range of investors.
Has there been a demand for alternative crypto assets or are clients investing in bitcoin first?
Bitcoin is certainly the most well-known cryptocurrency, so it gets a lot of demand. However, after about a month and a half after launch, we can see that larger investments have also been made in other currencies.
With SGKB, the next cantonal bank is already following suit. Are crypto assets discussed within the Swiss Cantonal Banks Association?
Yes, the cantonal banks are in loose communication with each other, as with other topics. I am convinced that other institutions will join in. I don't want to speculate on when and in what form these products will be launched. In five years time, probably not all cantonal banks will be offering crypto assets. However, next to LUKB and SGKB, we will certainly not be the only ones who have grown their product offering.
Does ZugerKB's crypto offering pose a risk to taxpayers because of the state guarantee?
No. The custody assets that the bank holds for its clients are not covered by the state guarantee. Like traditional securities, crypto assets are held as special assets in client portfolios. They are protected against the bankruptcy of the custodian bank. Therefore, the state guarantee does not apply and the question of cantonal or taxpayer is not relevant. The state guarantee also does not protect against the risk of portfolio value fluctuation. Just as stock trading, the risk is carried by the client. Although we offer cryptocurrencies without advisory services, we do inform our clients about the market risks.
Can customers expect an expansion of crypto services?
An expansion of services is possible. We will continue to closely monitor the market and customer needs. Assuming a positive development of the new offering, we will expand the portfolio of tradable assets as mentioned above. The transfer/delivery of cryptocurrencies, tokenisation and staking are options that we will consider in a second step.
Jan Damrau ZugerKBJan Damrau is a member of the Executive Board of Zuger Kantonalbank and Head of Corporate Governance. He holds a doctorate in law and economics and is responsible for the areas of Corporate Development & Projects, Human Resources, Communications, Law & Compliance, Competence Centres and IT. Before joining Zuger Kantonalbank, he was Head of Strategy Management and Innovation at Migros Bank. Prior to that, he held various management positions in different institutional banks. Several years of experience in management consulting complete his professional profile.
