Private market exchange ADDX is recognising the cryptocurrency assets when onboarding accredited investors, becoming the first Singapore financial institution to do so.
The move makes it easier for investors to qualify for accredited investor status, says the company on June 8.
With this status, accredited investors can participate in more sophisticated investment opportunities in the private markets, which tend to be more resilient in times of market volatility.
Such opportunities include private equity and venture capital funds, hedge funds and pre-IPO companies.
In order to recognise crypto assets, ADDX will implement appropriate risk management measures that take into account the price volatility of these assets, in line with regulations.
For example, ADDX will recognise only cryptocurrencies with a higher market capitalisation and will apply a discount rate when valuing the assets.
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As part of its process for verifying accredited investors, ADDX will begin recognising three coins – Bitcoin, Ether and USDC. The discount rates ADDX will apply when calculating the value of these crypto holdings is 50% for Bitcoin or Ether and 10% for USDC.
These coins and discount rates will be reviewed at regular intervals and may be revised as market conditions change.
Under Singapore regulations, investors have to meet any one of three criteria in order to qualify as accredited investors.
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First, their income in the past 12 months has to exceed $300,000. Alternatively, their net financial assets in the past 12 months should exceed $1 million. Finally, their net personal assets should exceed $2 million in order to be qualified as accredited investors.
Crypto assets may not be recognised as part of an investor’s income or financial assets, but they can be recognised under the third category of net personal assets.
To qualify as accredited investors, individuals can provide documents to show that the value of their net personal assets meets the $2 million threshold after the inclusion of crypto assets with the discount rate applied.
Choo Oi-Yee, CEO of ADDX says, “Cryptocurrencies are here to stay. They no longer exist only on the fringes of wealth and investment conversations. With a large minority of investors owning crypto, it is reasonable for these digital assets to be recognised as a part of one’s portfolio – not unlike any other assets that can be valued in the marketplace, such as real estate or equity.”
“In line with ADDX’s mission of democratising private market investing, recognising crypto holdings helps us to serve a much wider segment of investors – not just investors with traditional holdings, but those who hold crypto as well. At a time when the markets are volatile, this move is also designed to enable crypto investors to diversify into the regulated private markets, which tend to be more stable across different phases of market cycles,” she adds.
In addition, Choo sees ADDX as being “well-positioned” to bridge the two worlds of traditional finance and digital assets.
“Investors increasingly expect a seamless view of their complete holdings because their traditional wealth and crypto wealth ultimately belong to a single portfolio. They want the best of both worlds,” she says.
“Last year, ADDX listed our first fund with exposure to crypto, and today we are recognising crypto assets for accredited investor verification. These steps form part of a more strategic and comprehensive crypto roadmap for ADDX. In time to come, we are likely to enable customers to fund their investment wallets with cryptocurrencies and to convert their assets between fiat currencies and crypto.”
