Gazprombank’s Swiss unit was recently given regulatory approval to store and trade cryptocurrencies on behalf of clients. They join a growing list of such banks in Switzerland. But buying stocks and bonds with bitcoin remains a taboo subject in the traditional banking sector – for now. The key breakthrough has been finding a way to make bitcoin banking payments compliant with anti-money laundering rules. Banks don’t just transfer money for their clients – they also pass on information on their identity and the source of funds. This is to comply with a global anti-money laundering regulation known as the “Travel Rule” and it is performed via the SWIFT interbank messaging system. The trouble is that cryptocurrencies are created, stored, transacted and audited differently from dollars and francs. The answer is to build an alternative to SWIFT.
Several systems are now available around the world, including the Swiss decentralized and open source protocol known as OpenVASP. OpenVASP has been tested and declared functional using a system built by Swiss software developers 21 Analytics. In August, the financial services firms Mt Pelerin and Crypto Finance claimed to have conducted the first Travel Rule compliant bitcoin transaction. This was followed by another successful test transaction between Gazprombank Switzerland and Bitcoin Suisse. Dukascopy Bank has become a member of a different Travel Rule solution, Sygna Bridge, developed by Taiwanese company CoolBitX. The bank, which has issued its own Dukascoin digital payment token, said it is open to further collaborations, but for now, Sygna Bridge offers a solid answer to the Travel Rule plus exposure to the “strategically important” Asian market. Proportional or not, regulators and lawmakers in Switzerland are not blind to the potential enhancements digital assets could bring to the financial center.