sygnum

Photo: Clement Goh

FTX‘s catastrophic collapse in November 2022 was a seismic event that sent shockwaves through the world of digital assets, leaving in its wake a landscape forever altered. As the value of crypto currencies plummeted precipitously, a gnawing sense of doubt crept in, casting a long shadow over the future of this burgeoning industry. It was a moment of reckoning for Sygnum, a digital-asset bank in Switzerland that also offers asset management services in Singapore.

“For a brief period of time afterwards, it was somewhat unclear what the ultimate impact on our business would be,” says Gerald Goh, one of Sygnum’s three co-founders and its Singapore chief executive officer (CEO). The other three are Luka Müller , Manuel Krieger and Mathias Imbach, who are chairman, board member and group CEO respectively. 

The market has since emerged from that crisis with a much greater awareness of and sensitivity towards the counterparty risks and credit risks associated with participants and service providers in the digital asset industry, reckons Goh, 44, adding that Sygnum has benefitted from the “resultant flight to safety”.

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He discloses that Sygnum’s banking platform in Switzerland saw net new money inflows of more than USD$800 million ($1.094 billion) in the final six weeks of 2022, growing its asset base by nearly 30 per cent. The six-year-old digital asset tech company has also continued to see strong inflows in 2023, he says. 

The good news doesn’t end there. Just the day before the interview, Sygnum announced that the Monetary Authority of Singapore had approved its Major Payment Institution Licence (MPIL), a speedy four months after it was granted in-principle approval. He was in a buoyant mood, jokingly lauding me for “bringing us luck”. 

His enthusiasm was understandable, as receiving the MPIL, after all, represents a watershed moment. “It allows us to actively engage in Digital Payment Token brokerage, helping clients navigate the complex world of cryptocurrencies, and will usher in a new phase in Sygnum’s growth plans both in Singapore and the region,” Goh explains.

Expansion and partnerships

“We have plans to expand across APAC and are evaluating Hong Kong as well as other markets. We look forward to bringing our suite of fully regulated services to both existing and new clients, such as institutional investors, high net worth individuals, corporates, banks, and distributed ledger technology foundations.”

Besides establishing a larger book of direct client relationships, a key strategic focus for Sygnum is expanding its business-to-business relationships with other leading financial institutions. “We have already established ourselves as a market leader in Switzerland, with 16 Swiss banks partnering with us to enable their clients to gain exposure to regulated digital asset products and services.” Sygnum currently has four offices in Switzerland, Singapore, Luxembourg, and Abu Dhabi, with more than 220 staff.

A new proposition

Achievements and growth aside, what sets Sygnum apart from other players is the core values upon which Sygnum was built. The founders believed, from the outset, that cryptocurrencies and digital assets were not transient phenomena but heralds of a broader digital transformation. 

To make these assets accessible to the broader public and institutional investors, they recognised the necessity of regulatory oversight — a lone wolf in an industry often defined by anti-establishment sentiment and a libertarian ethos. 

“A regulated environment is not an impediment but a catalyst for growth in the digital asset space,” he asserts. Goh underscores that their unconventional approach, emphasising cooperation with regulators rather than defiance, was guided by the belief that regulation is inevitable and the key to widespread adoption.

“We chose Singapore because it’s a nation renowned for its robust regulatory framework,” he adds. “We wanted to build trust in the industry from the ground up, and we saw regulation as the path to credibility and trustworthiness.”

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He remembers the pushback they received from both sides of the aisle: “The OGs of the crypto world were pouring scorn and derision on us for trying to build a centralised financial institution to service what is effectively a decentralised asset class. Our peers on the regulated traditional financial services side were very dismissive of the possibility that crypto could be anything more than a plaything.”

Apart from the lack of peer support, additional challenges arose in this rapidly evolving and uncertain landscape. “The lack of regulatory clarity, especially in the United States, has acted as a deterrent for institutional investors,” he admits. “Uncertainty around potential regulatory actions has made organisations wary, leading many to adopt a ‘wait and see’ attitude.”

To counter this resistance, Sygnum persuades institutions to embrace cryptocurrencies through “education and transparency — [they] are our cornerstones,” states the former managing director (private investments) of investment adviser Cambridge Associates. “We educate stakeholders about the risks and rewards of early crypto exposure while preparing them for the eventual establishment of clear regulations.”

sygnum
Photo: Clement Goh

Sygnum’s regulatory triumph

Internally, Sygnum grappled with the critical question of timing, oscillating between fears of either being too ahead or lagging behind in the integration of crypto into mainstream finance. The daunting prospect of depleting funds before achieving substantial progress casts a shadow. 

“There were moments when we worried that our efforts were too far behind, while many competitors or peers had raced ahead with less regulated or completely unregulated offerings that were clearly gaining market traction,” he relates.

However, while the FTX fallout left many in the digital assets industry in turmoil, Sygnum’s conviction from the outset that “we should be running towards the regulators running towards trusted jurisdictions and working there with the most forward-thinking regulatory bodies to pioneer new licensed and regulated financial activities around digital assets and crypto” was unequivocally vindicated.

The “mix of optimism and naivety that you require as an entrepreneur”, Goh feels, helped them stay on course. “We never doubted that we were on the right side of history, that this was the direction of travel. The (incidents of the) intervening six years between Sygnum’s origin and today have affirmed our stance.”