Since the value of bitcoin has recovered from its 2018 fall, the wider crypto sector has largely stabilized and once again become part of the mainstream investment mix for a growing number of investors and the financial institutions that serve them. Long term, it is clear that cryptocurrencies are here to stay. 

Similarly, distributed ledger technologies (DLTs) – which underpin bitcoin and other cryptocurrencies – continue to disrupt financial markets and the infrastructure driving the financial services sector by getting rid of the messages currently used to synchronize all the variables in a transactional chain.

This will develop even quicker in the coming years, with exchanges providing a real-time and atomic delivery-versus-payment (DVP) process and automating corporate actions.

In turn, this will lead to faster and cheaper transactions, reduced credit risk and, consequently, an increase in the number of assets and their liquidity. On top of this, there will be an explosion of asset classes: entities that are currently non-bankable will be tokenized and made tradable. This will move the industry towards a pure, end-to-end digital experience with regard to all types of assets.

Market needs

Investors, wealth managers and banks are looking for convenient, simple-to-use solutions to help them invest in cryptocurrencies. Such is the size of the crypto market now that they need secure and transparent solutions to add to and expand their existing platforms, bringing to them an integrated view of all assets owned by their clients, whether traditional or crypto-based.

Sophisticated end-investors are looking to their trusted financial services provider for an industry-grade, secure end-to-end integrated solution in order to manage their crypto and traditional assets through familiar processes in one place.

Avaloq is able to deliver this solution: in December 2018, we announced the launch of a pioneering, fully integrated crypto asset solution in partnership with crypto asset custody infrastructure specialist METACO (Avaloq holds a 10% stake in the business). The aim of this product innovation is to provide banks and wealth managers with a fully integrated solution for the management of client portfolios across all asset classes, including cryptocurrencies.

Avaloq vision

  • Integrate crypto assets as native assets in the core banking platform so that all the existing features are made available for crypto assets
  • Ensure and integrate best-of-class security for securing private keys so that transacting on cryptocurrencies is made as simple as transacting on any other network
  • Enable our clients to easily issue tokens so that they can be part of this revolution

  • Partner with other providers so that we cover the entire value chain in a turnkey solution
  • Open our solution to different networks and solution providers, effectively bridging them (different exchanges, public and permissioned DLTs, different issuance processes)
  • Support other core banking systems – not just Avaloq’s – bringing this set of services to less advanced core banking systems

Roadmap

Today

The first version of our unique cryptocurrency product is live with one client and generating a strong interest in the market. 


 

Further ahead

The next version, planned for the end of 2020, will make it possible to issue digital assets on public networks first and then on permissioned networks. We’ll start with standard assets and increase the complexity in line with our clients’ and market needs.

In 2020, we’ll also develop some connectivity plug-ins to exchanges so that instantaneous DVP becomes a reality. This link to exchanges will also enable in 2021 the transfer of products issued by banks to secondary markets increasing the liquidity.

As we expect an increase in the range and number of digital assets in the coming years, we’ll also continue to explore the side chain technology in order to ease the asset transfer between the numerous networks that will likely also be developed.

This ambitious roadmap will continue, as we currently do, to support our clients in staying up to date as they provide their clients with the best digital experience.

The next 12 months

The second version is due to be launched at the beginning of 2020. It will be microservices-based and bring:

  • online banking (mobile and web): making buying/selling and transfer of crypto available through online banking 
  • support of the “ERC-20” digital assets (later in 2020) to expand the universe of assets and secure the first building block for tokenization
  • an expansion of the current ecosystem of partners for crypto solutions (Metaco, CryptoTax, Sanostro, AlgoTrader, Blocksize, Sanostro) in order to cover the entire value chain, from custody to pre trade