Bringing institutions to Defi

Transcript

uh topic of this keynote is like bringing institutions to d5 um i'm from sigmund bank and my name is martin burger and i'm the chief client officer of of sigma bank so four topics that we want to address ahead of vitalik's talk so i will be no longer in the 15 minutes so first brief introduction of who signo means and then like the value of regulation i think regulation becomes more and more important with what has happened over the last one or two months in the crypto space then um how to bridge the gap from d5 to c5 and then the institutional defy opportunity so just very briefly like who is signing bank

and you see it here so we are a regulated bank in switzerland and basically we provide different services to our clients so avr bank which means we have access to all the fiat rails we offer us dollars swiss francs euros and the likes and but we are also a custodian and this makes it very unique that's also why we are the world's first digital asset bank so we offer native wallets inside the banking grade environment and if this offering we actually primarily target institutional clients this means that within signal bank so you have access to a the fiat accounts like you're used to from traditional banks but b you also have access to wallets native wallets for bitcoin ethereums erc20s um and actually quite the number of

coins um our offering is primarily targeted to institutional clients um and in order to combine these fiat world and the crypto world we actually have also we are also a broker so we offer 24 7 brokerage uh for our clients so you can actually convert crypto into fiat and and uh field into crypto 24 7 on our platform we also have other services across these different verticals so for example we offer options trading we see that within the institutional space that actually resonates quite well especially when we had like volatility spikes like we now saw over the last couple of weeks then we also offer loans so you can

actually pledge cryptocurrencies with us and then we run to a loan against this crypto collateral um we also offer asset management services that's also something that we see for some institutional clients it's difficult to navigate through um the crypto space and they they like to rely on our asset management expertise in order to do token selection or uh run certain momentum strategies and the likes and we also offer our services to other banks that's actually very interesting to see i think when we talked about this bank for banks offering two three years ago there was not much interest um now this year we already have actually 10 banks under contract and so it shows that more and

more banks they start to believe that crypto becomes an established asset class and hence they are partnering up with a bank like us so that they can access this new emerging asset class through a player like sigma um then um institutional regulations or what what does it mean and the thing here uh what we also observe is that like two three years ago no one wanted to be regulated like it was not fashionable to talk about regulation when you were in crypto you talked about crypto but i think now uh what happened uh with the lenders uh in in in may and june i think they showed like how important regulation is like regulation is not here to well prevent someone no but regulation is here actually to protect customers and um

so we are a bank that's actually i would say the champions league of a license um and i would say it's difficult to set up but it's very resilient to crisis because like of course banking regulations they learned from many of the crisis this makes a bank probably one of the most resilient institutions that you can set down and now we see many players they use the word regulated but in our view we would consider this probably rather like a tent regulation right easy to set up but it's a bad choice in stormy weather so just because you do a selfie to onboard it doesn't mean that your customer assets are safe and being a bank in switzerland has actually one very very significant asset and you see it illustrated on the right

hand side of the slide so when you custodize cryptocurrencies with us it's like well like when many people say like not not your keys not your coins but actually when you hold the coins of us the coins they still belong to you so these coins do not become part of our balance sheet and hence you also don't have any counterparty risk and i think this seems to be quite an important differentiating factor now for us because of course now with what have uh has happened many people they are quite aware um of these credit risks and they actually also suffered losses due to these now breaching the gap between cefa and defy and so i think what we observe and we are in the middle of this signal bank because

of course we being a bank but also for encrypted we are really at this we are this bridge between both worlds and i think we see that we have the the d phi island on the phi island many crypto activated people but they for example they want to buy real estate right so they they ask themselves why why is real estate denominated in usd hence it means that even if you want today you cannot just stay in the crypto space you need to somehow if you want to yes buy real estate or even if you want to buy a car most likely you need to go through a financial institutions hence we see that there is a gap um for people in the defy space in order to actually purchase assets in the real world on the other hand we see in the cfi islands or or in

the in the tread phi island we see that um the literacy about crypto is still on a very very low level henceforth when you talk to all the banks when you talk to family officers when you when you talk to pension funds well they say i don't need a wallet i need crypto right so they they they still they don't understand that this is a fundamentally new technology hence the gap between these c5 and diva is i think quite the big cap and hence there is also a very strong need actually for a bridge um between duo these two worlds and however like whenever there is a gap there is also a huge opportunity yes and we had signum bank we tried to fill um this this gap and for example in the

in the in the d5 space we we said now let's bring certain defy opportunities to institutional clients and what they did is we first we said okay let's select what kind of clients do we want to target we said we want to target professional clients we want to target institutional clients because we feel that this is also where the literacy is really really low and there is actually a need for easy convenient university um then we actually went through different defy opportunities so we said okay what kind of opportunities are actually these institutional players interested in um and we said okay and probably indexes they don't see such a big opportunity yet

um in like insurances or or um money market like instruments like these sappler finance probably also not yet but we saw that they have quite the high interest in landing and borrowing so what you can for example do through an away through a compound we are all familiar with it and and then we actually decided okay do we want to do it direct direct means like we connect really we connect the signal wallet directly to another pool um or or the likes or do we want to do it indirect um which means we create an investable product like for example a fund or an amc and we said we want to do both um i think the native way is probably

the the really the crypto the crypto native way and we really much want to follow these crypto native a because we are crypto natives at signal banks and but we also wanted to make the indirect way because the indirect way is actually i would say from a regulatory point of view it's it's easier to set up the regulators are a bit less cautious when it comes to these kind of investment layers and and hence he also said we also want to do the indirectly and then i'm saying like it's difficult to go the the direct way and just sharing a story that we had with the swiss financial market supervisory authority when we discuss those with them like how we can for example provide native wallet and

they asked us yeah but how is signum actually controlling the ethereum blockchain well we don't and if we could you should be worried that not if we cannot um so these are challenges that you face if you want to innovate in the um in in the digital asset space as a regulated player but as i said like of course it also adds huge value to the customers now the direct way is not yet complete so today you cannot yet connect a wallet from signum directly to for example an rv or a compound and but the indirect way is finished and what he actually came up with is really a yield core amc aims he's a font like structure is technically a depth

instrument but still it works like a phone um so we can now institutional clients we can offer like 12 to 16 percent per unknown um with a low volatility less than 5 percent and it's actively managed which means we continue to screen the market for a new attractive opportunity and provide these opportunities to to our clients within this structure and we actually did a risk comparison between um dfi and and threat phi and what we did is actually so we checked in if you look at the fixed income product in the traditional space you

always look at the probability of default and low-skilling default and likes and what we looked at is actually at technology risk so it means how many d5 pools have been hacked and if they have been hacked like how much was actually the loss out of this hack and we now came up with i think if you look at data you see that okay the absolute losses they are going up if you look so the the absolute amount hectic is going up but given that the total value locked in these protocols is actually growing at an even faster pace we see that and the attractivity of the of the d5 landing opportunities they actually increased and you can compare it now if you look at the threat firewall you can compare the risk of

investing into like these kind of yield opportunities to approximately a triple b double b rating which is quite solid if you compare it um to tread five and also if you look at then the risk reward um it's actually very attractive because like for a triple b instrument in the traditional space you probably get today five to six percent it's now increasing given the uh raising interest rates but still so it's quite an attractive risk reward opportunity that he had um within this amc we already have 20 million primarily from institutional clients we just launched it actually a month ago and so there is still space to grow and we are quite convenient we

can grow these kind of products to more than 100 million probably um even 200 250 million over the the midterm and it shows that i think um institutional clients they are interested to get into the digital assets by space for many of them the risk and drawdown risk of direct investment is probably still too high so some of them still reluctant to take actually direct exposure in ethereum bitcoin or the likes but they have appetite to try something out and i think these it now showed like the market feedback showed that they have appetite for example for a product like this and of course through this product they indirectly benefit from all the innovations which are going on in the in

the device space now when we look at this product in a bit more detail so how do we generate inside these products and what we do is of course what we actually do probably privately within the with our metamouse wallet and the likes so we really we engage in lending activities um so yes we use platforms like avi we use platforms like curve for example to really lend and generate yields however right now the yields are of course quite compressed so we do not achieve these 12 to 16 percent if these even the compressed yields that we see but we also do other thing we for example do liquidity provisioning when

we do liquidity provisioning we of course we hedge the risk for example opening permanent loss and so that we don't face these kind of risks and we also do staking which taking you actually also do the same if we stake then we try to hedge the market risk because we don't want to have directional exposure within the product and we also do arbitrage arbitrage across different strategies and so all all market neutral strategies of course by definition of arbitrage and this then also contributes a certain return on on these kind of assets so i think with these i'm actually already at the end of the presentation just i think on time so that we can all go and listen to it the

league but for us i think interesting to see there is a gap between c5 and d5 in both ways uh we try to breach it for um traditional players but they also try to breach for crypto natives who actually have investment needs in in the traditional space and we also see that institutional money is interested in the e5 they don't have the knowledge to do it themselves so they wouldn't do it through a wallet most of them wouldn't because you know to have wallets to to have a key set up which institutional grade is quite a high entry barrier for them hence um they rely on someone like for example like us who has the asset management expertise who has the technology

expertise to structure product for them and then they invest like this into the e5 but still we all benefit from it because money is actually flowing into the defy space thank you and i'm very happy to take questions yes no we use use taking partners so basically we just we select opportunities so basically we collect money from investors we come up with an investment strategy and then we would actually yes invest in these opportunities and through staking partners we don't run notes ourselves or likes goods thank you very much

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