It’s also relatively new – the first bitcoin block was mined 13 years ago – so there hasn’t been much time for governments, academics and the media to wrap their heads around the subject.
Nonetheless, most of bitcoin’s early use cases were illicit – extorting hacking ransoms, for example, or selling drugs on the dark web – so the link with anarchism became entrenched.
Fast forward to today, and bitcoin is a very different animal.
In the town of Zug, SEBA Bank, one of two Swiss crypto banks, is reporting a surge in institutional demand for cryptocurrencies thanks to its myriad regulatory licenses.
“ having a fully decentralized system where everyone manages his or her own keys, and no one trusts anyone, but they can all verify everything.
Many of the industry experts who are trying to make bitcoin a part of everyday life seem to agree.
“We need regulation and we need laws,” Ardoino says.
Thus when crypto banks like SEBA and Sygnum offer custody for bitcoin deposits, their services are held to the same standards and obligations that apply when traditional banks custody fiat deposits.
The advantage of this approach, officials say, is that it allows the rules to be applied universally in fast-moving situations.
Instead of writing brand new legislation for bitcoin and other blockchains, the government made ten separate amendments to pre-existing laws – some more than a century old – bringing them up-to-date while harmonizing the rules for traditional financial entities and newer fintech players.
Second, the integration of DLT trading and settlement layers into one single step – an upgrade that significantly boosts the efficiency of digital trading platforms, and that’s only possible thanks to the immutable nature of blockchains.
There are many other areas that still require legal and regulatory clarity, of course – chief among them DeFi protocols.
“You can be assured there’s hundreds of pages going back and forth between the regulators and us,” says Mathias Imbach, Sygnum’s co-founder and group chief executive.
What is it on a bank’s balance sheet if you have exposure to a decentralized liquidity pool? How do you manage that from an Excel accounting standpoint? What does it mean for your liquidity ratio? Is it that you need to have a financial audit on the smart contract every year? That’s not possible because it’s not a centralized entity.
But their involvement means that a field which might otherwise be deemed unscrupulous or disreputable is enjoying a mainstream makeover – potentially mirroring bitcoin’s own evolution from a currency for drug dealers into a store of value for financial institutions.
Even today, much of the money we use as a medium of exchange is private money – it’s credit from banks.
A more pertinent question, he suggests, is whether a decentralized, proof-of-work cryptocurrency like bitcoin is really capable of being a “better medium of exchange” than the public and private alternatives.
“Overall, that’s not the question we need to answer as a regulator – whether blockchain technology is really the gamechanging thing that the market thinks,” Landerer says.