Aave Advances Institutional Strategy as Swiss Bank Seeks Whitelist Status

SEBA, a Swiss bank focused on digital assets, has published a governance proposal requesting to be a whitelister for Aave’s institutional lending platform Arc.

If approved, the role would task SEBA with onboarding users onto the platform and monitoring their KYC and AML compliance. It would also mark a big step forward for Aave’s strategy of catering to institutional investors.

In July, the protocol announced it was developing a permissioned institutional platform and received mixed reactions from the crypto community. Some expressed anxiety about a leading DeFi team devoting energy toward building a closed protocol.

Crypto Banks

SEBA said there is strong institutional demand for decentralized finance even though lawmakers worldwide are increasingly taking aim at the open and largely unregulated retail DeFi sector.

SEBA’s proposal comes roughly two months after the bank launched SEBA Earn, an offering approved by the Swiss Financial market Supervisory Authority (FINMA) to permit “professional and institutional investors to access yields in permissioned DeFi protocols.”

In August 2019, SEBA and Sygnum AG became the first two firms licensed by Swiss regulators as “crypto banks”.

SEBA’s governance proposal said “institutional clientele” have expressed “significant interest” in accessing Aave and other top DeFi protocols. It said that local regulations have prevented many investors from making large deposits in decentralized finance dapps.

“Due to various regulatory restrictions in their jurisdictions, SEBA’s institutional clientele has not been able [to] deploy liquidities at large scale in Aave until now,” wrote the SEBA representative that published the proposal. “The launch of Aave Arc with its permissioned layer represents a great opportunity for [SEBA’s clients] to access DeFi yields while remaining compliant with their regulatory obligations.”

Tight Connections

Aave institutional offering, “Aave Arc,” only supports BTC, ETH, AAVE, and USDC currently, with users onboarded via a whitelister. The Arc whitepaper states that whitelisters must be “a regulated entity that is authorized to conduct the requisite level of KYC/KYB for users.”

If approved for the role, SEBA will be able to onboard users and grant permission for wallets to participate in Arc protocol transactions. The firm will also be required to conduct know-your-customer and anti-terror finance and money laundering checks of on Arc users.

“With its tight connections to money managers in Switzerland and beyond, SEBA is ideally positioned to bridge institutional liquidities in the Aave Arc protocol,” the bank said.