W
hen a new digital currency
called Bitcoin emerged in
2008 from the ashes of the
worst fi nancial crisis in living memory,
many, like software engineer Niklas
Nikolajsen, became overnight converts.
In 2011, Nikolajsen moved to the crypto-
friendly canton of Zug in Switzerland,
where he then built up Bitcoin Suisse,
a cryptocurrency fi nancial services fi rm
off ering prime brokerage, custody, lend-
ing and ancillary services.
Others built cryptocurrency exchanges
or businesses that enabled millions
around the world to buy, sell and store
cryptocurrencies.
It hasn’t always been easy, of course;
cryptocurrency exchanges have come and
gone or been shut down by regulators,
and bitcoin’s price has fl uctuated wildly.
During the “crypto winter” of 2018, it
crashed from $10,000 to below $3,500.
In mid-August, it passed $12,000. The
cryptocurrency market is currently val-
ued at more than $200 billion, but cryp-
tocurrencies still have not cracked the
mainstream.
Despite the challenges, Nikolajsen and
other converts have managed to build suc-
cessful businesses. From a humble startup
in 2013, with just two student employ-
ees and a rented desk in the lobby of an
offi ce building, Bitcoin Suisse now boasts
more than 140 employees and “bank-
ing-grade” offi ces in Zug, Copenhagenand Liechtenstein. In 2019, it reported
net revenues of nearly $23 million. Yet,
Switzerland’s oldest cryptocurrency
fi nancial services fi rm struggled to gain
access to the banking services that tradi-
tional companies take for granted.
Typically, millions in annual revenues
would at least get one through the door,
but cryptocurrency firms report prob-
lems even getting banks to take their
calls. Nikolajsen, in crypto-friendly Zug,
where bitcoin can be used to pay for cer-
tain municipal services, told fi news.ch in
2017 that he had approached more than
50 Swiss and foreign banks before fi nding
one that would work with him.
“It’s difficult to get a bank account
when you’re making 50,000 transactions
a month,” says Mauro Casellini, CEO of
Bitcoin Suisse Liechtenstein. “Not that
many banks are open to that. They don’t
have the compliance people who under-
stand it or where the bitcoin is coming
from. They don’t make a lot of money
out of it, and they don’t want to take on
the risk.”
Joe Ciccolo, founder and president of
BitAML, an international compliance
advisory fi rm exclusively serving the bit-
coin and cryptocurrency market, says only
a handful of banks are crypto-friendly.
“A lot of banks haven’t taken the time
to learn about crypto,” he says. “They
have been dismissive.” In most cases, the
fi rms simply want a deposit account, butthey struggle to obtain even that. “Many
[cryptocurrency fi rms] are so desperate
for a bank account they don’t care who
they bank with. They call around to
banks, but before they can get a conver-
sation going properly, they hear a click on
the other end of the line.”
Cryptocurrency fi rms are not the only
ones reportedly struggling to set up bank
accounts and other banking services.
Mark Hipperson, CEO and founder of
UK-based Ziglu, a digital platform that
allows customers to hold crypto and fi at
currencies in a single account, says only
a few business-to-business banks, includ-
ing ClearBank in the UK, LHV Pank in
Estonia and Silvergate Bank in the US are
receptive to fi ntech startups. Silvergate,
based in La Jolla, California, started ser-
vicing cryptocurrency fi rms in 2013. As
of June 30, the company reported 881
digital currency customers. Fee income
from digital currency customers for the
quarter ended June 30 was $2.4 million,
compared to $1.7 million for the first
quarter of 2020 and $1.1 million for the
second quarter of 2019.
“In terms of the current size of oppor-
tunity [from digital currency customers],
it’s very signifi cant for us,” says Alan Lane,
CEO of Silvergate Bank, “but it’s prob-
ably insignifi cant for most of the larger
banks.” Lane’s interest in digital curren-
cies was sparked in 2013 when he bought
some cryptocurrency. It didn’t take himCrypto
Corporates
Despite some setbacks,
cryptocurrency continues to
grow and expand. Now that
JPMorgan Chase is on board,
will other traditional banks
follow? By Anita Hawser42CORPORATE TREASURY SUPPLEMENT 2020|CRYPTOCURRENCY