Cyrus Fazel: "SwissBorg has nothing to do with the likes of Celsius".

Cyrus Fazel: "SwissBorg has nothing to do with the likes of Celsius".

The boss of the SwissBorg investment application talks frankly about the market downturn, the competition and his future products.

The Big Whale: How's SwissBorg?

Cyrus Fazel: Everything's fine, but it's true that the crypto sector is going through a complicated period! In just a few months, players who were offering incredible returns thanks to decentralised finance protocols like Aave or Compound have collapsed. Some "magicians" like the Three Arrows Capital fund were offering rates of 20% thanks to very risky strategies, but at what price... They are now bankrupt. We have always chosen to be more cautious, which some clients have criticised us for, but the situation is now proving us right.

How did you get through the spring crash?

To say that we weren't scared would be lying to you! A lot of articles at the time presented us as the next domino, the next player to fall. Some of our clients withdrew their funds, but a large proportion of them came back when they realised that everything was fine.

You still offered a return on the UST stablecoin just before it lost its indexation against the dollar...

That was a mistake, we shouldn't have listed it. However, I would like to make two things clear. The first is that we warned our users that it was very risky to invest in UST. The second is that we advised them to get out of UST before Terra collapsed. Some of them didn't listen to us... But that's nothing like what happened at companies like Celsius (read our investigation) or Voyager, where a large part of the funds disappeared.

Have you ever worked with these players?

No, never. We had initially planned to work with Celsius because we wanted to offer collateralised loans that these players made it possible to set up. But we soon realised that they weren't square enough. SwissBorg worked a little with the American company Galaxy Digital until we realised that they were doing arbitrage with the GBTC. We then decided never to lend them funds. Same thing with Celsius.

But the worst was still Three Arrows Capital because they really are "hedge funds guys". I know this environment well having worked in it for a few years. I'm very familiar with the extremely high level of risk that these structures are capable of taking.

What explains why SwissBorg slipped through the cracks?

I think we had the right mindset and also a bit of luck (laughs). We've always wanted to protect our customers' accounts, while offering them the best decentralised finance services. It's not easy, but that's the mission we've set ourselves.

In contrast, players like Celsius take absolutely no account of their customers. They take 95% of the profits while leaving them crumbs. Celsius is a real black box. We have nothing to do with this kind of player.

The advantage of what has happened is that it will probably no longer be possible to have such players on the market. The regulators are going to demand a lot more transparency on the use of customer deposits.

How do you assure customers that you are not 'gambling' with their funds?

Customer funds are segregated. They are not mixed with those of the company. This is an obligation under Estonian regulations (where SwissBorg is registered, editor's note).

The only way we can use them is with the agreement of our customers. To be clearer, we have designed our application as a kind of private blockchain. All your assets are linked to your identity and you are the only person authorised to move them. Only in a few extreme cases, such as the death of a client proven by a notary, can we touch funds without the user's agreement.

How does SwissBorg differ from other crypto investment apps?

Mainly by the prices. A "Premium" user of SwissBorg - who acquires and immobilises between 500 and 50,000 CHSB tokens, or between €90 and €9,000 - probably benefits from one of the best offers on the market.

You make it possible to buy cryptos and make a return on them. What new services are you planning to launch?

We've just released Earn to take advantage of returns based on different levels of risk. Until now we've offered low-risk strategies, but our users also wanted to be able to expose themselves a little more.

Now for USDC stablecoin, there are two options to choose from: one on Aave that gives 2.1% per year, and a riskier one on Stargate that offers 4.6%. Our application explains why one strategy is riskier than the other, the aim being to provide customers with as much information as possible. Taking risks is not a problem, but investors must do so with full knowledge of the facts.

During your ICO in 2017, you presented SwissBorg as an asset manager "with a crypto sauce". Is this still the case?

We have always wanted to transpose private banking standards to crypto. Between now and the end of the year, we will be offering indexes that will allow one-click exposure to a basket of tokens based on various themes (layers 1, gaming, NFT, etc.). This is much more innovative than ETFs, which are very popular in traditional finance, because users will really have the tokens in their wallets, whereas with ETFs you don't really own the shares held by the fund manager. Our service will be dynamic: if a token appreciates strongly, the composition of the basket will be automatically rebalanced.

And over the longer term?

The aim is to have the necessary authorisations to offer tailor-made investment products to suit each customer: their budget, their risk appetite...

Are you planning to bring out a payment card?

I'm in favour of it, but I don't yet know when we'll be able to bring it out. There is still some doubt about the usefulness of a payment card for our customers. We've noticed that the cards that offer cashback are used a lot, while those that don't are used much less.

We have a token (CHSB, -75% over the last 12 months, editor's note) that we could use with a card. We're thinking internally about setting up the right system, but nothing has been decided yet.

What storage technology do you use?

We were initially using Curv's MPC technology, but PayPal terminated our contract after it was bought out. Since 2022, we have been working with Fireblocks, which is also an MPC solution.

Unlike its main competitors such as Taurus or Metaco, Fireblocks enables thousands of transactions to be processed in the cloud. During the bull market of 2020-2021, we recorded days with more than 50,000 transactions! Without this kind of solution, we would never have been able to keep up with the load.

Why not work with Ledger?

Ledger doesn't do MPC. But choosing between MPC and asset custody via hardware wallets like Ledger offers is like choosing between skiing and snowboarding... You're bound to take the snowboard! (laughs).

Do you think MPC is more secure?

MPC has been championed for fifteen years by the leading security specialists for one simple reason: there is no backdoor whereas there are in all other technologies. I love Ledger and I hope that one day we'll be able to work together, maybe even to come up with a hybrid solution that combines their know-how and MPC. But for the moment Fireblocks is way ahead of the game when it comes to managing decentralised finance...

How many customers do you have today?

We currently have around 700,000 users spread mainly between Switzerland, France and the UK. These customers represent just under €1 billion in outstandings. During the 2021 peak, we reached €2.2 billion!

What has PSAN registration in France brought you?

SwissBorg may be Swiss at heart, but our ambition is to have a presence throughout Europe. Registration went very quickly. We had a very good relationship with the Autorité des marchés financiers (AMF). France has always been a very big market for us, so it was important to get this registration as quickly as possible.

You are quite well known in France. How do you explain this breakthrough?

Like me, several of the founders of SwissBorg have both Swiss and... French nationality. So France is a natural market for us. We quickly forged links with French influencers, like Owen Simonin (Hasheur on Youtube) or Sami from Journal du Coin, who have become our ambassadors in France... It was easy to deal with them, especially as there aren't really any influencers in Switzerland, maybe apart from Roger Federer, who I haven't managed to get (laughs) yet.

How would you describe the Swiss ecosystem?

Switzerland is a very complex country. It is one of the most democratically advanced states and a highly decentralised country. This has many advantages, but it also has disadvantages, especially for business... What is authorised in Lausanne is not necessarily authorised in Geneva, Fribourg or Neuchâtel.

And then there's the fact that there are several languages. Of course, big banks like UBS have managed to develop everywhere in the country, but it's taken them between 50 and 100 years! As it's very difficult to be available everywhere, businesses aimed at individuals are quite rare in Switzerland. We don't have this problem in France: if a product is available in Paris, it will be available everywhere else.

Why are you officially registered in Estonia?

Let's be clear: we always wanted to be in Switzerland. But we quickly realised that to be available in Europe, we needed to be registered in a European Union country. Hence the choice of Malta, followed by Estonia from 2021. And we're delighted with our choice because the country is really pro-crypto.

Everything that matters in Web3. Each week.
Try insider for free, for 30 days.
All that matters in crypto.
Deciphering, insights, Data. Access the best of the ecosystem.
In this article
No items found.
In this article
No items found.
In this category