One of Switzerland’s best-known Bitcoin speculators is betting he can attract more traditional money to the secure Alpine bunker that houses his cryptocurrency stockpile.
Niklas Nikolajsen and former UBS Group investment banker Philipp Vonmoos have set up a venture called Swiss Crypto Vault that aims to lure ultra-high net worth individuals and institutional investors with its “deep underground storage, state-of-the-art encryption, multi-signing authorization processes and many more security features”.
The storage space is available for clients starting on Wednesday, and can handle various cryptocurrencies, including Ether and Litecoin, Bitcoin Suisse said in a statement.
Bitcoin Suisse, the cryptocurrency broker Nikolajsen founded, moved its own hoard of electronic currency and client holdings to the bunker, the two entrepreneurs said in an interview in Zug, the canton near Zurich that’s home to hedge funds, crypto firms and commodity traders.
“Many banks already have important clients where they simply cannot say no when they ask about crypto investments and crypto financial services – that’s when banks get in touch with us,” Nikolajsen said, adding that Bitcoin Suisse already has about 10 lenders as clients and more than 10,000 relationships overall.
The company isn’t the first to tap a decommissioned Swiss Army bunker for Bitcoin.
Despite existing only in cyberspace, cryptocurrencies need physical protection, given the regularity of well-publicised hacker thefts and the risk of natural catastrophes such as server-damaging floods. Xapo, a rival venture, has developed a network of vaults in nations including Switzerland and is said to be guarding as much as US$10 billion.
Publicly, Switzerland’s best-known banks have stayed away from offering crypto trading to their clients, citing everything from security to compliance concerns. Swiss Crypto Vault is set up as a joint venture between Swiss Gold Safe and Bitcoin Suisse, which entered a partnership last year with Falcon, an Abu Dhabi-owned, Swiss-based private bank.
Nikolajsen, a long-haired, mustachioed Danish expat who won’t say how much cryptocurrency he owns, launched one of the first platforms in Switzerland that allows trading of Bitcoin against Swiss francs. The entrepreneurs declined to say how much they are going to charge, adding that the Swiss financial regulator, Finma, is “fully aware” of their plan.
Bitcoin Suisse is also advising on so-called initial coin offerings.
Switzerland has emerged as a premier crypto destination thanks to low taxes and some regulatory support. Ethereum, the world’s second-largest digital currency, set up its foundation in Zug. The canton itself started experimenting last year with allowing citizens to pay for government services in Bitcoin.
Swiss Crypto Vault’s facility, like Xapo’s, is located in one of the hundreds of bunkers built in the Cold War to resist a nuclear attack. The venture leases a section of the bunker and has a backup facility elsewhere. To prevent hacking, the cryptocurrency keys are stored offline.
PricewaterhouseCoopers will regularly review the security setup, and a notary must be present if the venture’s own executives want to open the vault.
The first rule of owning Bitcoin is to securely keep the private key that lets you spend your coins. Even physically carrying the key doesn’t guarantee immunity from hacking.
Carrying hardware wallets “won’t bring you very far. This is simply not an institutional-grade solution,” Nikolajsen said.
A greater comfort level among those institutional investors could help revive the price of Bitcoin, which has tumbled more than 55 per cent this year as regulators step up scrutiny of what critics have deemed a vehicle for fraud.
“The next level for the crypto community is for additional institutions to enter the space,” Vonmoos said. “They will only do so if there is a super secure way of storing the assets or the private key.”