In an interview with the online magazine BTC-ECHO, Hubert Büchel explained why other banks are still sceptical about blockchain technology, why a bank is ideal for the safekeeping of cryptoassets and why not every exchange can trade security tokens.
Custodian for crypto assets
BTC-ECHO: Mr Büchel, can you explain to us what exactly a custodian for crypto assets is?
Hubert Büchel: As is the case with traditional banking, it is basically a matter of holding assets in safe custody. While people have learnt over millennia to assess analogue values and risks, completely digital crypto assets pose us with new challenges. At worst, they can be irretrievably lost. Conventional approaches primarily focus on affording protection against natural risks, accidents and unauthorised access. Bank Frick possesses expertise that is unparalleled worldwide, allowing us not only to make known risks manageable, but also to counter political risks. And this means things are simple for our clients: traded assets are booked like a normal stock market transaction via their accounts or safe custody account.
What security measures does Bank Frick take for crypto assets?
Security means ensuring the integrity of the private keys at any price and limiting access to the greatest extent possible. We safeguard integrity by means of geo-redundancy. Access is restricted at the expense of availability but reduces the level of risk to a minimum. We make remote access technically impossible through the application of permanent physical isolation and multiple layers of encryption. Transactions are exclusively executed in an environment of high trust and require the involvement of several people. We also have a very good monitoring system in place and can respond quickly to changes.
What do you think about the scepticism of other banks?
We do not share the scepticism of other market participants. What we can say is that the great interest shown by investors and the steadily increasing number of cases in which the underlying core technology is being applied demonstrate the enormous potential of this newly emerging market – especially for regulated products and services on the blockchain, which we already offer as a Bank. Of course, we understand that such technological leaps are in some cases viewed “cautiously”.
What projects does Bank Frick have planned in the area of crypto assets?
At present, the tokenisation of traditional assets is enjoying a great deal of attention from Bank Frick. A token represents the value of the underlying assets. Here, the difficulty still currently lies in trading. As these are security tokens, they can only be traded via corresponding providers who have authorisation to execute such transactions. We are therefore very excited to see how the exchange and broker market will change in future. […] Our focus here is the development of AIF funds, and with the Postera Fund we have co-developed the world’s first crypto fund that is structured according to European law. Our Payment Service Provider team is, of course, also interested in the optimisation of payment solutions on the basis of blockchain technology. Moreover, there are other developments and opportunities that we are monitoring on an ongoing basis and following closely – for competitive reasons, however, we do not wish to comment any further here.
What has changed for Bank Frick since the news was published that the Postera Fund has been authorised by the FMA?
We had received an enormous number of requests even prior to receipt of initial approval. This was especially true with respect to blockchain companies, ICOs and funds. The news, of course, gave the whole process an additional boost and further spread and established the Bank Frick brand within the crypto scene.
What is your opinion on the work of the FMA to date? What would you like to see from the Liechtenstein authorities as regards regulation?
Our exchanges with the FMA have been cooperative, constructive and valuable throughout. In just a short space of time, the FMA has been able to build up vast knowledge and therefore to support us with the realisation of our plans. Thanks to the blockchain law announced by Liechtenstein Prime Minister Adrian Hasler, we generally expect an even higher level of legal security – especially with respect to new business models. It confirms our strategy, and this is, of course, something that we welcome. At the same time, Liechtenstein is thus showing itself to be a pioneer at a European level, and we would like to contribute to helping establish this role.