Bank Frick, a Liechtenstein-based private bank, began offering cryptocurrency investment services to its existing customers in the first quarter of 2018.  Bank Frick continued to pursue and develop various aspects of its digital token service offerings.  For example, it established a subsidiary, DLT Markets in February 2019, to provide institutional investors with an independent trading platform for the digital token asset class.  As of May 26, 2020, Bank Frick began offering support for US Dollar Coin (“USDC”), which is described as a stable coin linked to the U.S. dollar at a 1:1 ratio.   The head of blockchain at Bank Frick stated that, “With the addition of USDC, we enable our customers to process [U.S. dollar] payments quickly and token-based.  Compared to the classic SWIFT procedure, the processing time is significantly reduced.” 

USDC is a cryptocurrency created by Centre, a consortium comprised of Circle Internet Financial Limited, a peer-to-peer payments technology platform, Coinbase Inc., a digital assets exchange platform, and BitmainTechnologies, Ltd., a bitcoin mining company.  Each USDC is backed by a U.S. dollar held in reserve.  USDC is described as a stablecoin because it is designed to minimize price volatility relative to other cryptocurrencies by being pegged to another asset that is considered stable in value (the U.S. dollar in this case).  As of June 2019, approximately US$340 million in USDC were in circulation.  USDC surpassed a market capitalization of US$600 in March 2020.

SWIFT (an abbreviation for Society for Worldwide Interbank Financial Telecommunication) is an organization that provides a communication network enabling financial institutions to send and receive information about financial transactions.  SWIFT is a messaging system—rather than a payment, clearing or settlement system—by which financial institutions communicate payment orders, that must be then settled by correspondent banking accounts that the institutions have with each other.  SWIFT reports that it has recorded 38.2 million messages on average per day during 2020.

Bank Frick portrays USDC as a means to settle U.S. dollars transfers, via the transfer of USDC, faster than a transfer of U.S. dollars initiated via a message on the SWIFT network.  A transfer initiated via the SWIFT network is typically settled within 24 to 48 hours.  Bank Frick asserts that a transfer of USDC can be settled in significantly less time.  Nonetheless, on June 16 Bank Frick released a statement clarifying that, although it now supports USDC, Bank Frick continues to rely on SWIFT.

Author

Christopher Murrer is an associate in the International Tax and Wealth Management practice groups of Baker McKenzie Zurich. He joined the Firm after practicing for seven years as a domestic tax and estate planning attorney in New York and Washington, DC.