Compliance around digital assets, exclusive interview with Sygnum Bank

Monday 12 February 2024 10:56 CET | Editor: Mirela Ciobanu | Interview

Dr. Firas Nadim Habach, CFA, Head of Compliance & MLRO at Sygnum Bank AG, discusses the intersection of compliance and digital assets, exploring how this intersection can be transformed into an opportunity within the digital asset realm.

What is Sygnum Bank for those who do not know it yet?

Sygnum is a global digital asset banking group, founded on Swiss and Singapore heritage. We empower professional and institutional investors, banks, corporates, and DLT foundations to invest in digital assets with complete trust. Our team enables this through our institutional-grade security, expert personal service, and portfolio of regulated digital asset banking, asset management, tokenisation, and B2B services.

In Switzerland, Sygnum holds a banking licence and has CMS and Major Payment Institution Licences in Singapore. The group is also regulated in the established global financial hubs of Abu Dhabi and Luxembourg. Our crypto-native team of banking, investment and digital asset technology professionals are building a trusted gateway between the traditional and digital asset economies that we call Future Finance.

From a compliance and AML standpoint, this brings benefits for our clients and partners, as Sygnum is one of the few regulated banks and payments licence holders with this depth and breadth in digital assets and a strong network in both the financial markets and blockchain ecosystem.


What are your expectations for crypto and digital assets in 2024 in terms of institutional adoption?

We are in the fortunate position to have just surveyed a sample of institutional investors in our December 2023 Sygnum Future Finance 23 report. Our survey found that a majority of institutional investors see crypto as an opportunity to participate in expected market upside and a ‘safe haven’ strategy to hedge against traditional markets. Two thirds of these investors are looking for exposure to the crypto megatrend and indicated that single token exposure is their preferred crypto investment strategy, with established blue-chip assets like Bitcoin and Ethereum. This aligns with the recent Bitcoin ETF approval for the US that has captured institutional investor attention.

When it comes to digital assets and tokenisation, our research also indicated the demand for tokenised real-estate higher than venture capital and art and collectibles.


What are the current challenges and complexities faced by banks and financial institutions in Anti-Money Laundering (AML) and compliance when dealing with digital assets?

The challenges and complexities are similar to innovative solutions made by banks and financial institutions in other areas. A key consideration is a consistent definition of digital assets and how to define comparable evaluation and regulation across jurisdictions. We have seen a gradual convergence across several jurisdictions, which is significant considering initial guidance published by various multi-national organisations. Convergence is typical once experience is gained through interaction with these authorities as rules are put into practice. This is particularly evident in Switzerland, the EU, Singapore, and the UAE. The further consideration is the sophistication of industry participants: do banks and financial institutions have adequate know-how, staffing, and tools to apply a risk-based approach and have the confidence to interact with the digital asset space? Blockchain ecosystems offer several benefits over traditional markets, but they also require a differentiated approach, which is typically innovation and new regulatory considerations. So, while challenges remain, there are tremendous opportunities too.


What is the significance of the approval of the Bitcoin ETF by the US SEC?

The approval of Bitcoin spot-based exchange-traded funds (ETFs) in the US market decision brings legitimacy, trust, and unprecedented integration into the traditional financial system. It's like a regulated free trade agreement between Wall Street and the crypto industry, allowing market participants exposure without requiring a digital asset wallet. 

It is likely that another wave of institutional adoption will be the result with a new magnitude, considering the clients and market share represented today by the approved fund providers. For example, many large pension funds and insurance companies already work closely with providers such as BlackRock and Fidelity.


How do you anticipate the Bitcoin ETF transforming banking and finance in relation to AML and compliance?

The approval is significant, and the compliance aspect is particularly interesting. It will require development of regulation beyond the classic AML obligations for financial institutions today. MiCAR is one such example: this EU regulation ensures adequate investor protection and consistent transparency disclosures are also provided for digital assets. With ETFs, and noted in the media, a key issue is appropriate custody, segregation of assets and correct submission of documents to regulatory bodies. This is an example of putting it into practice. With this experience, the industry will gain confidence and trust.


As a speaker at the 17th NextGen Payments & RegTech Forum, could you provide a brief overview of the topics you will be addressing? This will help encourage The Paypers readers to attend the event.

I will give an overview of the regulated digital asset space and the lessons learned. The growing disintermediation and need for converging regulation and rules of engagement. As the industry matures, more and more fascinating use-cases materialise, helping the general public learn, understand and consider adoption.


About Firas Nadim Habach

Dr. Firas Nadim Habach is the Head of Compliance and MLRO of Sygnum Bank AG, responsible for the activities within Switzerland, Luxembourg, and Abu Dhabi. Prior roles include positions at J.P. Morgan and Deutsche Bank in Switzerland.

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Keywords: cryptocurrency, tokenization, AML, compliance, banks, digital assets, regtech
Categories: DeFi & Crypto & Web3
Countries: Europe
This article is part of category

DeFi & Crypto & Web3