Vontobel is the next Swiss bank to break into digital asset custody. Why that’s good, and why it’s not surprising.
Vontobel, a major Swiss investment bank, has launched a crypto custody solution targeting banks and asset managers. The new tool named “Digital Asset Vault” allows banks and asset managers to offer their clients crypto-related services, including digital assets purchases, transfers, and storage.
With this service, Vontobel wants to position itself as a digital frontrunner in the institutional space. “Digital Asset Vault represents the logical next step in the development of our range of services for digital assets,” said Roger Studer, the Head of Vontobel Investment Banking.
“With our innovative strength and experience, we have thus closed the gap between existing and digital assets. By incorporating digital assets into our own banking infrastructure, we have also become the first provider to already meet the high standards required by financial intermediaries and their regulators.”
Crypto-custody as integrated banking service
According to an official press release, Vontobel’s Digital Asset Vault provides a solution that is similar to custody solutions for traditional asset classes. Banking customers can store their assets within Vontobel’s banking infrastructure and use an online banking-like user interface wich provides a consolidated overview of their traditional and digital assets.
To ensure maximum security standards, Vontobel combines Hardware Security Module (HSM) technology and its own banking infrastructure. The bank says Digital Asset Vault makes Vontobel the first bank in the world to comply with standards required by both regulators and financial intermediaries.
This is not Vontobel’s first move into the digital asset class. In 2017, Vontobel’s Bitcoin certificate was one of the most popular crypto products traded on SIX Swiss exchange. Vontobel also provides its clients with cryptocurrency investments while the bank is acting as a lender.
Institutional investors need regulatory compliant custody solutions
Asset custody has been a challenge in the crypto investors for many years but, the industry has found solutions. The issue is not so much with private investors, who can store their assets on a cold wallet for maximum security and connect it to a hot wallet or an exchange whenever they want to buy or sell an asset.
The problem is more with professional investors like asset managers or hedge funds, who on the one hand, need the asset available for trading immediately and without delay, which makes cold storage unfeasible. On the other hand, they also need to meet strict regulatory requirements, which is why hot wallets are not good enough.
Thus, a solution like Digital Asset Vault will find market demand by professional crypto traders. Also, Zurich-based Vontobel is the third-largest financial custody provider in Switzerland, with 110.3 billion CHF ($112.2 billion) in Assets under Management. Thus, the company has a large client base and enjoys an excellent reputation within the financial industry.
It’s a good sign for the overall market that a bank like Vontobel sees a market need for professional custody soluitions because it indicates institutional investors are getting more interested. We can observe a similar development in Germany, where the government has made legal changes to allow banks to provide crypto trading and custody services to their clients. Since the legal changes came into effect in January 2020, more than 40 banks have already expressed interest in a BaFin license to provide crypto services.
Thus, the trend is evident: Banks are coming to crypto, and they might bring their clients with them.