ADDX is first Singapore financial institution to recognise crypto assets of accredited investors

PRIVATE market exchange ADDX will now consider cryptocurrency assets in verifying accredited investors, becoming the first financial institution in Singapore to do so.

Under Singapore’s regulatory regime, individuals have to meet any 1 of 3 criteria to qualify as accredited investors. They must have drawn income in the past 12 months exceeding S$300,000, or have net financial assets exceeding S$1 million, or have net personal assets exceeding S$2 million.

While crypto assets are not currently recognised as income or financial assets, they can be recognised under the third category of net personal assets.

For now, ADDX will recognise 3 crypto coins – Bitcoin, Ether and USD Coin. It will apply a 50 per cent discount rate when calculating the value of investors’ Bitcoin and Ether holdings, and a 10 per cent discount rate for USD Coin holdings.

These coins and discount rates will be reviewed at regular intervals and may be revised as market conditions change, ADDX said.

To qualify as accredited investors, individuals can provide documents to show that the value of their net personal assets meets the S$2 million threshold after the inclusion of crypto assets, accounting for the respective discount rates.

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ADDX said that its recognition of cryptocurrencies with higher market capitalisation and the application of discount rates in valuing the assets are part of “appropriate risk-management measures” it will implement to take into account the volatility of crypto assets.

According to figures from CoinDesk, Bitcoin’s market capitalisation stood at about US$563 billion on Tuesday, Ether’s was about US$209 billion, and that for USD Coin, about US$45 billion.

The move opens the way for more individuals to qualify for accredited-investor status, and participate in more sophisticated investment opportunities in the private markets.

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ADDX chief executive office Choo Oi-Yee said it is reasonable for cryptocurrencies to be recognised as part of investors’ portfolios, given that a “large minority” of investors now own crypto.

“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 said.

She added that ADDX expects to on-board a “significant number” of investors as a result of this change in policy, but exact figures are not available at this time.