Julius Baer announces cryptocurrency plans
"At Julius Baer, we are convinced that digital assets will become a legitimate sustainable asset class."
Julius Baer has announced that it will start offering cryptocurrency and other digital asset storage, transaction and investment solutions.
For perspective, Julius Baer is the world's 11th largest private bank by assets under management, according to the Scorpio Partnership 2018 Global Private Banking Benchmark, managing almost $400 billion.
“At Julius Baer, we are convinced that digital assets will become a legitimate sustainable asset class of an investor's portfolio," said Peter Gerlach, Head Markets at Julius Baer.
Julius Baer's crypto offerings come as part of a partnership with Swiss startup SEBA Crypto, in which Julius Baer also made a minority investment.
According to Reuters, the partnership will take effect when SEBA Crypto gets a banking and securities dealer licence. This is likely to be some time during or before Q2 2019, according to the SEBA Crypto roadmap.
“We are very proud to have Julius Baer as an investor. SEBA will enable easy and safe access to the crypto world in a fully regulated environment. The cooperation between SEBA and Julius Baer will undoubtedly create value for the mutual benefit and to the clients," said SEBA Crypto CEO Guido Bühler.
SEBA Crypto is also planning an ICO in late 2019, when it will be launching its own cryptocurrency. Julius Baer's announcement comes after JP Morgan (8th largest private bank by assets under management) announced its own cryptocurrency, dubbed JPM Coin, for settling payments among its clients.
According to Julius Baer, the decision to offer cryptocurrency was based in part on a belief in the sustainability and future of digital assets, and was also in part due to client demand.
That there is serious demand is unsurprising, and all indications point to extravagant growth for digital assets as an asset class in the relatively near future.
- More than 50% of millionaires in Europe say they're at least somewhat interested in cryptocurrency.
- Earlier this month public pension funds – typically famously conservative – decided to start investing in blockchain and digital assets.
- Grayscale's quarterly reports show an ongoing influx of money from institutional investors throughout 2018.
And in this case, Julius Baer and SEBA Crypto are unlikely to run into major regulatory obstacles, given the broad support from regulators that cryptocurrencies enjoy in Switzerland.
There is already a lot of money flowing into digital assets, and it's undoubtedly just the beginning. The question is to what extent this money goes into bitcoin and the open cryptocurrency markets, rather than more insular investments like private equity in blockchain startups.
Digital assets ≠ cryptocurrency
Indeed, Fairfax County Retirement Systems (FCRS), one of the those pension funds, took pains to reassure clients that it was not using their retirement funds to buy bitcoin.
It's "quite the contrary in fact" wrote FCRS executive director Jeff Weiler. "At least 85% of the Morgan Creek Blockchain Opportunities Fund will be invested in blockchain technology firms. As such, this is very similar to other private equity investments made by Fairfax's three retirement systems. No more than 15% of the funds will be invested in actual cryptocurrencies and, to-date, the Fund has no exposure to any cryptocurrencies."
FCRS made a total investment of $21 million through Morgan Creek Digital Assets, so even the full 15% of that would be $3.15 million. It's not exactly a market mover.
Julius Baer's partners at SEBA Crypto also see a separation between crypto-as-a-currency like bitcoin and digital assets more broadly. And on the whole, they're more interested in blockchain asset tokenisation than bitcoin.
"In the beginning the focus was mainly on Bitcoin," SEBA says. "[But] the tokenization of assets is the real breakthrough, and thus crypto-currencies as such, while still playing an important role, are losing relevance in the bigger scheme of the digital asset market transformation."
But all roads lead to crypto
But as Morgan Creek CEO Anthony Pompliano has pointed out, the first step is to gain familiarity with blockchain and digital assets. In his opinion, familiarity leads back to bitcoin.
"Bitcoin is a non-correlated asset with an asymmetric return profile. This is the holy grail for an institutional investor," he said.
And in the case of Grayscale, whose millions of dollars received far outpace the total amount invested by FCRS, its investors are directly purchasing cryptocurrency and have a particular fondness for bitcoin over all others.
And as Julius Baer said, it's moving to offer digital asset solutions in the face of customer demand. It's safe to say those customers are currently demanding solutions for cryptocurrencies like bitcoin and Ether, rather than pre-emptively requesting custody solutions for their future blockchain Warhols.
Most of all though, the money invested in blockchain technology has a habit of flowing at least partially towards cryptocurrencies.
"Blockchain not bitcoin" is a common refrain, but it's still difficult to separate the two.
Disclosure: The author does not hold any cryptocurrencies at the time of writing.