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Amy Yu, the newly-appointed Asia-Pacific CEO at SEBA Bank, talks to Kimberley Long about the evolution of crypto in Asia, and how customers are responding to recent shocks within the sector.
Switzerland-based crypto bank SEBA Bank announced the appointment of Amy Yu in February 2023 to oversee the bank’s expansion in Asia. The bank also opened a subsidiary office in Hong Kong.
Q: What is the appetite for crypto across Asia?
A: I moved into crypto in 2018 after a decade of working in traditional finance in Hong Kong, joining a large derivatives exchange. At that time, before the crypto hype, we could see on a global level the take up and interest in crypto, and how strong this was in Asia. What we noticed was the nexus of crypto trading really started from Asia, with a population who are already into gaming and very comfortable with purchasing digitally through apps. China has been operating on digital payments for years. It’s a region which would adopt the concept of crypto and digital assets.
Even in the early days when trading was driven by retail traders, we saw a high appetite for leverage and risk, and an aptitude for learning about and using new derivative and contract structures. People were interested in learning about the quanto swap. In the US and Europe by comparison people would be buying and holding bitcoin. Had the Asian exchanges not grown to the sizes they had I don’t think the rest of the world would have taken as much notice in crypto.
Q: How is the crypto space developing in the region within the boundaries of regulation which limit crypto in some locations?
A: In early trading you saw more cross-border arbitrage, depending on which clients could access which exchanges. A lot of the opportunity and reasons for getting into the market was driven by these dislocations. Some exchanges were harder to onboard or were deemed riskier, but would allow more leverage and thus higher potential return. The people who wanted that could drive up the premium on some of these derivatives futures. A contract on an Asian exchange could be trading at 18% premium, while the same contract in the US-regulated CME exchange could be at 8%.
Another interesting angle is the movement of people and talent as regulation starts to shape and dictate the space. At this point, investors who have been spooked or the more risk-averse are only looking at providers with licences. In Asia there’s Singapore and Hong Kong, where the regulators have been going to the market and speaking to participants to provide a safe place for clients and businesses to set up. On the other hand, some of the other jurisdictions are lacking clarity, and this is driving where crypto is flourishing.
Before it banned crypto trading and mining, many exchanges were based in China. A lot of businesses then moved out, going to places like Kazakhstan and Russia. Some tried Singapore, and a lot of the US-based mining activity has been driven over from Asia. The exchanges are looking for a safe place to be licensed and regulated. With the rules changing in Hong Kong, we are seeing some of the exchanges planning to come back to Asia.
With the rules changing in Hong Kong, we are seeing some of the exchanges planning to come back to Asia
Q: What are the ambitions of SEBA Bank as it expands into Asia?
A: First and foremost, we are definitely looking at Asia-Pacific seriously. Overall, we intend to establish a regulated presence in this region in the next two years. We are going to focus on the jurisdictions of Singapore and Hong Kong to start as both have positive regulatory landscapes with a deep history of financial services, capital markets, and are friendly to international players. The growth of the Hong Kong and Singapore subsidiaries will likely go hand-in-hand with this regulatory landscape and the licensing partners there.
Q: How does its offering as a registered bank differentiate it from the other crypto and blockchain financial services in the market?
A: SEBA Bank is our Finma-licensed headquarters, and one of the first and only fully licensed crypto banks. It means our bank offers not only banking but also wealth management, investment advisory, trading services, at the levels of security and customer experience expected of a Swiss-regulated institution.
We are a full-service bank also offering the markets side, an over-the-counter trading arm, and sophisticated trading user interface for the clients. Being a regulated entity matters a lot right now in the space, and there are few competitors who can do all this out there.
Q: How do you perceive the crypto market to progress in the future?
A: The past year or two have been an eye-opener for those who are new to the space. But it is part of the cycle. Investors are now thinking more about the counterparty risk, who they are giving their collateral to and where it is being kept. Are the counterparty who they say they are, and are they independently audited?
I think the crypto space will become more cautious. Clients will go to places they can trust, where assets are held off balance sheet and there are strict liquidity and capital requirements. Drilling into this, from a trading perspective, for clients that may not have realised the risk involved previously. If you look at my earlier point about the 18% return on the unregulated exchange, you need to think about how to price that risk. People are less likely to pay for the risk now. More of the market will pull back and not take on the risk.
The access points to the market will change, especially for the institutional crowd. Everyone likes to talk about decentralised finance (DeFi) i too – I think now DeFi and its exchanges will continue to develop but I don’t see the institutional crowd wanting to lose a centralised contact point. If something gets hacked, where do they get information from? DeFi is here and it will mature, but a lot of the market is not yet ready for that. Instead, they will go to the centralised providers they feel they can trust.
