Long considered the “wild west” of finance, it seems that digital assets are a step closer towards mainstream recognition. DBS Bank has announced that it will set up a digital exchange, allowing institutional and accredited investors to “tap into a fully integrated tokenisation, trading and custody ecosystem for digital assets'' - a possible world first for the formal banking sector.
DBS will tap on its deep expertise in deal origination and leadership in capital markets across key Asian markets to provide the exchange with potential issuers. The bank’s large pool of existing investors, says CEO Piyush Gupta, are very keen to invest in tokenised assets and will provide a large client base for the DBS Digital Exchange (DDE).
“The exponential pace of asset digitalisation provides immense opportunities to reshape capital markets. For Singapore to become even more competitive as a global financial hub, we have to prepare ourselves to welcome the mainstream adoption of digital assets and currency trading,” Gupta told the media.
Coinmarketcap estimates that the global daily trading value on the world’s digital exchanges ranged from US$50 billion ($66.9 billion) to US$100 billion in 2019. Gupta believes that the business pipeline is strong enough for the exchange to break even within a year of launch. “I am quite confident that this will be a very profitable activity,” he says.
Security Token Offerings (STOs) will be available at DDE. Users can access a regulated platform for the issuance and trading of digital tokens backed by financial assets like shares of unlisted companies and private equity funds. Investors will also be able to conduct spot exchanges between cryptocurrencies (Bitcoin, Ether, Bitcoin Cash and XRP) and fiat currencies (SGD, USD, HKD and JPY) .
Drawing on its experience as an established bank in providing world-class custody services for conventional assets, DBS believes that it can meet demand for institutional-grade custody services for digital assets under “prevailing regulatory standards”. It will provide the custody of cryptographic keys that control digital assets on clients' behalf.
As cryptocurrencies are relatively new and volatile assets, DDE will for now be members-only. Besides accredited and institutional investors, clients of DBS private bank and DBS Vickers will also be allowed to participate in the exchange. Gupta does not anticipate digital asset products to be offered to retail investors in the foreseeable future.
Singapore Exchange (SGX) will also take a 10% stake in DDE. It will work with DBS to explore deepening the liquidity, scale and growth of Singapore’s capital markets in the digital assets and currencies space. Gupta believes that SGX’s involvement will provide invaluable expertise and knowledge in running an exchange.
Said Loh Boon Chye, CEO of SGX, “We are excited to apply our strengths in market infrastructure and risk management to this venture. There are significant opportunities to bring trust and efficiency in price discovery to the global digital assets space.”
Run as a subsidiary of DBS, DDE is subject to the oversight of an independent committee. It has been recognised in-principle as a regulated market operator by MAS, allowing it to operate organised markets for assets such as shares, bonds and private equity funds.
Crypto-trading activities on DDE are expected to begin as early as next week. Originating business for STOs is expected to take a few months before the assets become available to investors. “We are pretty much ready and set to go,” says a confident Gupta.
