DBS to launch crypto trading platform for members next week

Singapore

EAGER to capitalise on the growing appetite for digital assets, South-east Asia's largest lender announced that it will launch a crypto trading platform as early as next week.

This platform, which will facilitate spot exchanges from fiat to cryptocurrencies, and vice versa, is one of three primary components of the DBS Digital Exchange announced on Thursday.

The members-only exchange, available to institutional and accredited investors, will also include a platform for the issuance and trading of tokenised digital assets, as well as the provision of digital custodial services.

The platform for security token offerings is expected to launch by the first quarter of next year. At first instance, the platform will involve tokenisation of financial assets including shares in unlisted companies, bonds, and private equity funds.

Its crypto marketplace will facilitate trading between four fiat currencies - the Singapore dollar, US dollar, Hong Kong dollar and Japanese yen - and four established cryptocurrencies including Bitcoin, Ethereum, Bitcoin Cash and Ripple's XRP.

All four digital currencies have seen strong price gains in recent months, and cumulatively account for about 80 per cent of global crypto trading volumes.

The digital exchange will operate as a subsidiary of the banking group, with DBS holding a 90 per cent stake and the Singapore Exchange (SGX) holding the remaining 10 per cent.

It will be helmed by Lim Meng Wee, who has spent over a decade at SGX and helmed various senior roles in several broker-dealer firms across Asia.

In a media briefing on Thursday, DBS group chief executive Piyush Gupta noted that the rapid pace of asset digitalisation provides 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," he said.

The global daily trading value on the world's digital exchanges ranged from US$50 billion to US$100 billion in 2019, according to crypto market tracking app CoinMarketCap.

Mr Gupta also pointed to several promising trends, including the growth of Asia's private equity market, growing interest among corporates to raise private capital in a tokenised format, as well a favourable regulatory environment in jurisdictions such as Singapore.

DBS' digital marketplace will mark a "pivotal moment" to facilitate recognition of the industry and spur it to "start finding its feet in the formal banking sector", said Mr Gupta, who believes that this will be the first digital exchange backed by a traditional bank.

"Leveraging the power and strength of DBS Bank allows us to build volume, liquidity and scale in this exchange, in a manner other bespoke exchanges find difficult to do," he said, pointing to, among other things, the bank's experience in providing custodial services, its established investor base, as well as distribution network.

Acknowledging concerns over privacy and hacking, Mr Gupta said the holding of assets in a bank rather than on the exchange itself, as DBS Digital Exchange sets out to do, will provide a greater degree of security.

He added that the bank has received enquiries from a "large roster of clients" in recent years looking to invest in tokenised assets.

The market for digital assets is shaping up competitively, but DBS believes it has a first-mover advantage. "I think part of the differentiation comes from being the first formal bank in the space . . . So we hope to be able to build up a book of business and stay secure over time," he said.

The bank is confident that it will break even within a year of launch, he added, noting that the "pipelines are already quite strong". He added: "I'm quite confident that this will be a very profitable activity; and, if my bet is right, that the world is going to move to a slew of tokenised assets."

DBS created a stir in October when a Web page for the said digital exchange was unintentionally made public, but later taken down. The bank had then said that it was still seeking regulatory nod for the initiative.

The bank's announcement on Thursday follows in-principle approval from the Monetary Authority of Singapore, allowing the exchange to operate organised markets for assets such as shares, bonds and private equity funds.

On Wednesday, Standard Chartered had also announced plans to launch a cryptocurrency custodian for institutional clients.

Dubbed Zodia Custody, the solution is a collaboration with the bank's Singapore-based fintech investment unit SC Ventures.

Once approved by UK authorities, the new company will provide custody services first for Bitcoin and Ethereum, followed by XRP, Litecoin and Bitcoin Cash. Zodia is expected to begin operations in London next year.

Speaking at a panel at the Singapore FinTech Festival earlier this week, both Mr Gupta and Standard Chartered chief Bill Winters had highlighted digital currencies as a phenomenon to watch.

"There is absolutely a role for central bank digital currencies as well as non-central bank-sponsored digital currencies," Mr Winters said.

Mr Gupta also pointed to the rollout of digital currencies backed by both public and private institutions.

"I think you will find over the next few years that some kind of network stitched together, but with the central bank digital currencies at the core, could become a reality," he said.