Interview with Matthias von Hauff, CEO of WEG Bank: Why does a bank cooperate with crypto service providers?

2 years ago on April 28, 2019

WEG Bank AG, based in the Bavarian municipality of Ottobrunn with a balance sheet total of around 90 million euros, would probably not have been known in the crypto world if surprising news had not spread online. The German WEG Bank is gradually opening up to companies from the crypto scene – almost 25% of WEG Bank is now owned by TokenPay Swiss AG, the Litecoin Foundation and, most recently, Nimiq.

The Swiss blockchain startup TokenPay, which specializes in secure payments, was the first crypto company to acquire shares in the bank's equity in May 2018. The acquisition of the bank, which specializes in condominium owners' associations (WEG), was the result of an initiative by WEG Bank itself, which also wanted to offer its customers Fintech solutions.

Two months later, the Litecoin Foundation came into contact with the bank's stakeholders. In his post, Charlie Lee, founder of Litecoin Foundation, made it clear that the foundation had "not paid any money for its shares in the bank" – the company received a 9.9% share from TokenPay. This was in return for the Litecoin Foundation helping TokenPay with marketing and technology.

In April, browser-based blockchain payment service Nimiq also announced a collaboration with WEG Bank to support the development of an infrastructure for crypto-to-fiat conversion for bank customers.

In total, the three companies own 24.9% of WEG Bank: Litecoin Foundation – 7.5%, TokenPay – 7.5% and Nimiq – 9.9%. The fact that Litecoin and TokenPay received 9.9% of the shares, as reported in the media, is true, despite the above figures. In spring 2018, TokenPay acquired 9.9% of the bank. Then the company gave another 9.9% to the Litecoin Foundation. However, as already mentioned, the Foundation did not receive this for money, but for services. At the end of 2018, WEG Bank's equity capital was increased, bringing the percentage shares of TokenPay and Litecoin Foundation down to 7.5%.

It is no coincidence that the shares of all three companies are limited to 9.9%. According to German law, a stake in a bank that is less than 10 percent is exempt from the supervisory authority's duty to audit.

But what are TokenPay, Litecoin and Nimiq planning with WEG Bank and what are the aims of these partnerships? Will the traditional German bank become a crypto bank? Or does WEG Bank want to document ownership shares in a blockchain? These are the questions "Cointelegraph in German" asked Matthias von Hauff, CEO of WEG Bank AG.

Cointelegraph in German: WEG Bank wants to expand its partnerships with the crypto companies TokenPay, Litecoin and Nimiq. What strategy are you pursuing?

Matthias von Hauff: I try to avoid the word "crypto" because I think it already has a strong connotation due to many confusing messages in the media. Our bank sees the growing spread of digital currencies as a great opportunity, since after a certain initial hype, an increasingly professional new class of investment instruments and payment services is now establishing itself here. Just yesterday [9 April] I was at a trade fair for banking products in Münster. Even the usually very conservative Volks- and Raiffeisenbanken will launch products for digital currencies in the foreseeable future. Through our cooperation with strategic partners such as TokenPay, Litecoin and Nimiq, we have our finger on the pulse of the latest developments.

"Our bank sees the growing spread of digital currencies as a great opportunity."

CT: What are WEG Bank's plans for working with these companies – TokenPay, Litecoin and Nimiq?

MH: All our collaborations with companies in the digital currency scene have one thing in common: we want to build a seamless bridge between digital currencies and traditional currencies. Our goal is to integrate the two worlds. Imagine you are on vacation in the USA and want to pay at the gas station. At the moment, you would probably use a credit card and decide at the gas station terminal whether you want to pay in euros or US dollars. We want you to be able to pay in Bitcoin (BTC), Litecoin (LTC), TokenPay (TPAY), Nimiq (NIM) or any other digital currency in the future, whether you use a credit card or your smartphone.

"We want to build a seamless bridge between digital currencies and traditional currencies."

I don't want to go into the individual cooperations at the moment, because the projects in development are not yet ready to be commented. However, I can already announce at this point that we will offer a revolutionary interface developed by Nimiq: OASIS (Open Asset Swap Interaction Scheme) will deliver the integration of traditional banking and digital currencies that we are striving for. We are confident that OASIS will be launched this year.

CT: As a traditional financial institution, what advantages can WEG Bank gain from these partnerships?

MH: In the current phase of low interest rates, banks are looking for new business models. WEG Bank AG is securing a role for itself as a pioneer. Our motto "Always one step ahead" is not a hollow marketing phrase. Rather, it is the mission that drives us. We don't want to react passively to such an exciting development, but want to actively shape it. To this end, we are also in constant, close coordination with the banking supervisory authorities.

CT: Your bank specializes in clients from the real estate industry. How do you want to bring together the classic real estate industry with crypto currencies or blockchains?

MH: Our house comes from the traditional housing industry. However, from the very beginning it was also here that the drive was to break new ground. At a time when most banks in Germany were still of the opinion that this was not possible, we granted loans for condominium owners' associations (WEGs). Our claim, then as now, was to be innovative, to design new products and to help where others hesitate. We succeeded in doing that. We have secured market leadership in our housing sector and continue to do so. We will continue to grow in the housing industry in the future. On the product side, there are currently no overlaps between the two worlds in our company. From our point of view, these are two completely separate business areas.

CT: Are there regulatory hurdles for a traditional German bank to venture into this area of innovation and cooperate with crypto companies?

MH: In the area of digital currencies, we see ourselves as a service provider for innovative payment transactions. I would like to prevent a possible misunderstanding in all clarity: WEG Bank AG is and will not be a "crypto bank". We ourselves do not hold any digital currencies and we also do not plan to issue any digital currencies.

"WEG Bank AG is not and will not be a "crypto bank". We ourselves do not hold any digital currencies and we do not plan to issue any digital currency."

Our focus is strictly on traditional currencies. Rather, we see our role as a kind of supplier. If person A buys something in a shop and pays in digital currency, for example Bitcoin, but the shopkeeper wants euros, then some form of payment method has to emerge, as would be the case with US dollars and euros. That is where we come in. We are providing a regulatory clean and technically secure infrastructure that enables the necessary payment transactions between digital and traditional currencies to be handled smoothly. As a CRR credit institution, we already have all the approvals required for payment transactions.

CT: Will TokenPay, Litecoin and Nimiq have the German banking license as a result of the share takeovers and thus gain access to the Europe-wide SEPA credit transfer scheme?

MH: The banking license is only with the bank. None of the partners will have a banking license due to their investment.

CT: Please explain how the cooperation between WEG Bank and Nimiq (or between WEG Bank and Litecoin/TokenPay) is technically implemented? Are certain programs/services used for this purpose?

MH: Unfortunately, I cannot yet provide any information on technical details, as we are currently in consultation with the banking supervisory authorities. I do not wish to anticipate the forthcoming discussions.

CT: The Litecoin founder Charlie Lee announced in July that he expected a position on the board of WEG Bank for himself. What do you think?

MH: Here there is always a message through the media, which is simply not correct. Therefore I am pleased about the possibility of being able to put here personally the following clarification: I have invited Charlie Lee to become a member of one of our planned "Advisory Boards". The term "Advisory Board" was probably abbreviated to "Board" in the media and then misinterpreted as board of stake holders. Charlie Lee is a valuable and excellent advisor to us.

CT: Recently, the Blockchain-Startup Brickblock brought the first EU property to the Blockchain by tokenization. Are you planning something similar?

MH: The possibility of bringing any investment to the blockchain is certainly one of the exciting topics in this area as a whole. Due to the minimal transaction costs, investors will in future be able to participate in projects that were previously reserved for the wealthy clientele. If such issues are carried out professionally and seriously, I see here a valuable contribution of the blockchain-based investment to social justice. We ourselves will not be making such tokenizations in the foreseeable future. However, I can already tell you that we are cooperating closely with a new partner – CPI Technologies GmBH. With CPI's market-leading blockchain expertise, tokenization will soon be part of our ecosystem.

CT: How do you assess the future cooperation of banks and credit institutions with companies from the crypto sector? Is a rapprochement possible?

MH: I think we are the living example of the rapprochement that is already in full swing.

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