Interview of 🔥Mathias Imbach🔥 CEO Sygnum Bank

Thank you for having me. It's great to be here.

You can think of Sygnum Bank as a digital asset banking group, which we've rooted from the beginning across Switzerland, in Europe, and Singapore in Asia. Since then, we have further expanded into the Middle East in Abu Dhabi, but also Liechtenstein and Luxembourg. With a regulation-first approach, we provide an all-in-one account approach towards digital assets, that is cryptocurrency, stablecoins, asset tokens, and integrate them seamlessly with today's banking infrastructure. So, we are a bank like any other bank with a full license, but apply from a technology and procedural standpoint that across the entire universe of assets. So, you can have fiat, traditional securities, as well as Bitcoin on our platform.

Yes, so our core mission has always been to empower everyone to own digital assets with complete trust. And one element of that trust is that whatever happens, the assets are yours. And so, as per the banking act, that is one of the core advantages of having your assets with a bank is that as long as they're off the balance sheet, so outside the balance sheet, and as a result, whatever happens to the bank, including ourselves, the assets are segregated and bankruptcy remote. And that's a key difference, for example, vis-a-vis holding assets or crypto assets on a crypto exchange, as you have seen in 2022 when, for example, FTX imploded. So, that is a very core value proposition of the bank. And of course, in addition, with that, there comes a lot of auditing and transparency, etc., which just helps build trust towards the clients, particularly institutional clients that are not used anything else.

So, well, you know, the beautiful thing is cryptocurrencies, in particular, they're 100% off balance sheet. So, whatever happens to the bank, they're fully segregated. We don't do anything with them, right? So, there's 100% at any point in time we need to be able to give back these assets to the client. And on the fiat side, it's the same rules as to any other bank in Switzerland applies. There's so-called Swiss deposit protection per account and per client also on the fiat side. But it's that's then still the on balance sheet treatment. So, on balance sheet is different from off balance sheet, and off balance sheet means it's fully segregated and outside, it's bankruptcy remote, basically.

Yeah, so we are about 5 and a half billion in assets right now. We launched in 2019 as a bank and we are 280 people across Switzerland and Asia. And we had last year around 90 million in revenues. So, that should give you a bit of a sense of where we are at.

It's almost like let me answer it in two parts. So, the first part around my message that I would not do it anymore is to be understood as follows, right? It was a big advantage for me to not have worked in a bank before co-founding one, let alone one in the crypto space and in digital assets space, which adds an additional layer of complexity to this mission because it's a different new field and innovative field where it has never been done before, which brings more complexities. And so, I had the advantage of approaching it in some shape or form together with my co-founders quite naively, and I don't mean naive in a negative sense. I mean, just thinking through stuff in a new way, not knowing some of the hurdles that we have to approach and overcome, and sometimes not knowing things that will happen down the line, that is challenging, frees you to just do it and not be scared of it and not hold back and to wanting to innovate and to just get stuff done. It's a bit like the paper problem, it's a problem but it's not a wall, you just walk through it sometimes. So that's how it felt to me. Now that I know what it means after these 8, 9 years, I must admit I would most certainly not co-found or found another bank because it can be very daunting and it's very difficult and the chances of success are I would say very low. I'm now lucky enough that we have been able to establish ourselves and can be on this growth journey, but there could have been many other outcomes as well. And in terms of risk-taking propensity, I grew up in Switzerland, but then studied economics, business in St. Gallen and at LSE in London, so I started with Bain & Company, that's a very risk-averse, kind of approach, standard career. It was fun, it was interesting, but I also had this angle of India. I had early exposure to India during my studies. I got to know Ratan Tata, an Indian industrialist, who unfortunately passed away a few years ago, but has become a big mentor and friend and later also my boss, so I had the chance to run his family office and as a result, my approach towards taking risk has really changed because, you know, if you move from Switzerland to India, you learn to deal with ambiguity and so that kind of opened up that world of entrepreneurship to me.

You know, I don't even think I can pinpoint this one particular thing. It's really the constant oscillation and it's pretty much on a daily basis, you know, and some of these oscillations are a bit more nuanced, some a bit more amplified, but it's just constant fighting of the many challenges that come with building a business, you know, in the early days it's about will we survive, will we get the next funding round done, you know, you have a lot of personal challenges as well in the sense that people may disappoint you, not finding the right talent, etc. And obviously operational challenges, challenges with clients, lack of traction during difficult market phases, etc. So that's what I mean, but then on the other hand, you see your team growing, you see young people taking responsibility, really building stuff and taking ever more responsibility, you see the successes, the first big client inflows, great technological innovations, recognitions, banks that are now working with us, etc. So that's then the euphoria part that I still till today have them every day probably a little bit of both, quite frankly. So it doesn't really change.

Yeah, I try to obviously it's a big part of my life. I always say entrepreneurs they have a life and they don't talk too much about work-life balance. They just you know, because it's part of your life and you integrate the company in your life. It's in my case one of my babies. The more important babies are my two real babies, my two daughters, and obviously that's also whom I spend time with, my wife and my two daughters when I have time. And otherwise it's my friends, it's sports. So I'm a passionate runner. I have my gym and in winter as a Swiss of course a lot of skiing.

I would say there's maybe three. One is that in the background, the institutionalization of the piping of the infrastructure, of the integration of traditional finance with the future finance, with digital asset enabled finance is in full swing. When we look at our B2B business, but also what is publicly known, all the large banks, they are really working on the piping, on getting custody up and running, on working with a stablecoin consortium to get these rails up and running. So, this has never been anything close to these kind of initiatives happening at the same time before. So, in that sense, this is very, very positive. This is obviously now the long game. This is the real institutional piping that is much advanced, but not yet complete. And so, many of the banks are really working. We work sometimes for 18 months with one bank to integrate, right? It's not trivial to particularly integrate with older legacy systems, a 24/7 kind of infrastructure, but they do it now. So, that's one. Second, I would say regulatory-wise, of course, everyone is watching the US, and that Clarity Act just made a big next step last week, or actually maybe it was even beginning of this week. And so, we are confident or I'm confident that this will be resolved, and obviously unleash further innovation because there will be much more clarity in the US, not just within the scope of stablecoin, but also more broadly, what is a security, what not, what is within the realms of SEC versus CFTC, etc. And then maybe in terms of innovation at the technological level, it's really this also leveraging AI and this is at the procedure level, all crypto companies, including digital asset banks like ourselves, we're massively working on rethinking the entire organization and the client life cycle leveraging AI. And in particular, I do feel that the convergence of AI and blockchain is going to lead to potentially one of the next kind of aha moments where people realize that probably an AI-based system, when it comes to transactions, it probably makes sense to leverage the blockchain and so the whole agentic payments topic is what we're also investing a lot of time and effort in. We believe it will be a significant use case in the future.

So I would structure my answer in two parts. One is I fully agree with you that it doesn't matter. It doesn't matter in the sense that people don't need to know what happens in the background because we'll be text based, we'll be really chatting with someone right either verbally or in text and in that sense people don't need to know whether there's a blockchain ultimately or something happening on the blockchain or not. But what we believe really matters is how fast and how efficient things can get done and it just makes much more sense to be able to transfer money within seconds versus a T plus two around the globe and that doesn't change whether it's AI initiated or analog, almost. It just makes much more sense to be able to do this on a 24/7 basis, particularly in a world where agents will start to work for us 24/7, not just during the day, 9:00 to 5:00 during office hours. In addition, I would say, particularly when it comes to financial services, maybe a bit differently from other elements where we use AI already now and will not do much more in the future, is the fact that this is about money. So, this will remain highly regulated. This will not be fully decentralized and everyone just doing whatever they want. And probably people will also want to have some element of control. So, what we, for example, tested, we had also announced it just last week, was that we have already an interface with the LLMs where people can literally do transactions, complex transactions, via just chat function, but there's always the element of the human interface that has to accept ultimately the proposals that the AI gives them. Because you want to know what happens with your money at each step. And so, it's kind of a human-guided AI in that's what we believe in.

It has, I mean, the growth has been phenomenal over the last few years, in particular the last 12 months since the Genesis Act has been passed in the US. This was the big unleash. I mean, it was a combination of the US stating that they will be anti-CBDCs, that they do not want a central bank digital currency. That was another push saying, 'Okay, they're really going down the US dollar, USDC with the stablecoins.' and this is a means of trying to sustain and further embed US dollar dominance. We have a country that has significant debt, right? And as a result, needs someone needs to buy these US Treasuries. And when you look at players such as Circle, but in particular also Tether, Tether is the seventh largest owner of US Treasuries. So, it's a means of establishing or continuing to keep the dominance in USD. And if you now look at the stablecoin market overall, about 99% is in US dollar, right? So, the rest of the world is still figuring out how we can catch up with this.

I think it's a relevant question, right? It's ultimately, I mean, in the past, already now, I don't know what percentage, but it's clearly more than 50% of global debt is denominated in US dollar, and that's basically the same thing. If you lend someone money in a certain currency, the currency in which you issue that is obviously dominating. And so, in many ways, what that fear that has been mentioned is in some ways already reality. And now it's about what I think doesn't help is noting it and not doing something about it. And what one can do about it is to create frameworks and regulations that lend themselves towards innovation and letting the private sector actually innovate and make sure that also other currencies are being issued on chain and maybe the US is typically a bit better and faster at doing that. I mean the US has basically decided that they want to have the private sector drive that innovation and backing it and I know with the MiCAR framework Europe also tries to do that, but let's just say it's heavy to fulfill all the requirements here.

Well you know they were late and particularly when it comes to digital assets there was obviously the Gary Gensler era right and the SEC prior to Trump taking over where it was just the opposite basically the US falling behind and not doing much or the players could not do much and then there was this maybe reaction or overreaction. Maybe it's just also trying to overcompensate what was happening in the four years before and now really catching up and sometimes in some areas overtaking. But when you then look at the details, the detailed rules etc. I can still say today because this is the country I know best from a regulatory standpoint. In Switzerland for example we have much more detailed clarity of the intricacies of managing cryptocurrencies and particularly also asset tokens in a banking fully regulated environment. There's also countries such as in the UAE, Dubai, Abu Dhabi have done a lot of work in it. Singapore, Hong Kong that is pushing hard on this. So I would say it's not just the US but with being the largest capital market in the world with a big margin, of course what they do matters also most.

It's a bit of both, but I would clearly say the dominant factor will be partnerships. It will be integration. It will be banks realizing they need these rails and that many will not be able to build all this infrastructure themselves. We see that in our case, but also our friends and competitors that there's a big growth area and most banks are moving this element from the innovation hub to P&L relevant and truly starting to put real money behind and getting it done.

Ready.

Neobanks.

Scalable compliance.

Some.

Yes.

I would have different answers for the two.

Well, yes.

No.

Not fully.

Eight.

US zero, Europe five.

10.

Six.

Two.

Thank you. It was a pleasure.