Banks will need to open up and work with others if they are to become one-stop shops for financial assets, including cryptocurrencies, says Brzezek.
Up to now, banks have been running everything themselves thinking that was the safest bet. Now they realize that a change of mindset is needed if banking is to become more dynamic and agile.
Crypto Finance enables banks to enter the crypto space by offering different services and products, among them asset management.
“Crypto is a new tech and we are all in the same boat trying to grow and move forward. We can’t all be good at everything, so it’s no longer about financial service providers competing so much,” says Brzezek.
So, do we need to substitute today’s traditional banking model? No, it’s a question of building on it, says Brzezek. “New banks are struggling with getting new business up and running. People want to get everything from one bank. This requires innovative thinking from the management of financial institutions; they have to realize they need to work with others to do things on their platform.”
What could entering the crypto space with a partner look like for a bank? Crypto Finance offers three ways in, each of them with different degrees of autonomy on the part of the bank itself.
The most ‘hands off’ option is asset management where Crypto Management manages the funds entirely. This way, banks can allow their clients to invest in cryptocurrencies without having to build up the necessary infrastructure.
If the bank does want to move more actively into the space and provide its clients with trading capabilities – meaning they can buy bitcoins directly and not just through a fund – then Crypto Finance runs the trading desk in the ‘back office’.
“We provide the bank with an Application Programming Interface (API) or a User Interface (UI) and they can set it up in their systems. If a client of the bank wants to buy bitcoin for 100,000 dollars, they enter it in their e-banking and send an order as they would buy equities or bonds and we would process it in the bank and send back the confirmation for the trade.”
There’s also what Brzezek calls an ‘infrastructure solution’ where Crypto Finance provides the bank with the technology, which is then operated by the bank itself. Tokenized assets come with a ‘digital board’ where banks can store digital assets on behalf of their clients.
“You may feel safe with just 1,000 dollars of bitcoin on your mobile phone, but would you feel comfortable with 10,000 or 100,000? I don’t think that if you were an institutional client with several millions of these assts (crypto currencies, or tokenised assets as private equity or private debt investments), you would feel safe running them in-house; you’d rather give them to the bank so they could store the assets for you,” says Brzezek.
All this provides a big opportunity for banks too; they can expand the universe of their assets under their custody from just the bankable assets as we know them nowadays to real-estate tokens and intangible assets like patents.
“The possibilities are endless. The banks need to get into it. That’s how the future will be and they need to be ready for it,” Brzezek cautions.
And yet crypto and blockchain tech is really just an evolution of what came before it, says Brzezek: “We have gone from physical shares in the post to electronic shares with a central security system and in the future they will be decentralised. This is evolution.”
However, he points out that a revolution is happening on the cryptocurrency side: “It’s an amazing invention not built by a company, but by a small group of people.”
He cites El Salvador, where the government has accepted cryptocurrency as a second legal means of payment, as a great example as it has enabled the population to participate in the financial system.
“The bitcoin wallet they created has 2.1 million people using it. More people have access to the financial system of the bitcoin blockchain for remittances and so on than what the largest bank there has in clients – and this happened in just a few weeks. That’s pretty exciting,” he says.
CEO, Founder & Board member ar Crypto Finance AG
Jan Brzezek is CEO, founder, and a Board Member at Crypto Finance AG. He also is Board Chairman of Crypto Broker AG and a Board Member of Crypto Storage AG. Before founding the financial technology company, Jan Brzezek held various positions at UBS Asset Management, Wealth Management, and Investment Bank. In his most recent position at UBS, he was Business Manager for the President of UBS Asset Management.Prior to his career at UBS, he was a derivatives expert at the SIX Swiss Exchange.