Singapore’s DBS Bank could open up its crypto trading desk to retail investors by late 2022. The biggest bank in South Asia has been warming up to crypto over the last year but this move could have massive implications for the cryptocurrency markets, particularly in Asia.
Singapore Leading Blockchain Adoption and Innovation
From antiquity, city-states have been hubs of innovation and commerce because that’s the only way they could thrive. Singapore is no different in this age with blockchain technology. Although Singapore prohibited public advertising of cryptos on January 17th, the city-state has been at the forefront of both regulating and endorsing the sector through its Singapore Blockchain Innovation Programme (SBIP).
The latest fruit out of this public-private cooperation will please all Bitcoin investors. In a 54-min Q4, 2021 earnings call this Monday, DBS’s CEO Piyush Gupta, announced that cryptocurrency trading will be expanded on the retail level after technical and security issues are sorted out.
“We are starting the initial work to expand it beyond the current investor base”
The “current investor base” is a reference to an already existing digital asset trading desk that the Southeast Asian banking giant launched in December 2020, the same month SBIP launched. At the time, the bank restricted its DBS Digital Exchange (DDEx) to select categories of clients:
- Accredited investors, mainly managers of wealthy families.
- Corporate investors, including SMEs (small and medium-sized enterprises).
The 600 members-only DDEx platform, including Singapore’s central bank (MAS), facilitates digital asset custody, securities tokenization, and secondary cryptocurrency trading. Interestingly, the service itself is old-fashioned—calling up the banking clerk over the phone to commit to a trade.
Presumably by the end of 2022, the service would remove such intermediaries and be done online-only. Only after that modernization, the same services will become available to retail investors as well. Ahead of the launch, DBS Bank already expanded its exclusive crypto trading desk to run 24/7 instead of the usual banking hours.
Could Singapore’s DBS Expansion into Crypto Retail be a Big Deal?
The DBS bank stands for “Development Bank of Singapore”, and is similar in purpose to China’s Development and Construction banks. DBS ranks 1st in Southeast Asia, ahead of the Oversea-Chinese Banking Corp (OCBC) Bank with a $95.5 billion market cap, running over 250 branches across 18 nations and 50 cities.
In turn, DBS Group Holdings, the non-operating holding company of DBS Bank, holds nearly $500 billion AuM (assets under management). This is a 173% increase following the Global Financial Crisis’ conclusion in 2009, at $181.5 billion.
After DDEx modernized its trading time to 24/7 in August 2021, the exchange more than doubled its trading volume for Q4 2021 compared to previous quarters, at $595.5 million. Overall, 2021 was exceedingly profitable for DBS, achieving a 44% rise in net profits at $5 billion. DDEx itself gained around $819 million in trading volume for the year.
Interestingly, the city-state was officially designated as a major global financial center by the International Monetary Fund (IMF), the same one trying to make El Salvador cancel Bitcoin as legal tender. This means that the crypto space is about to receive another big crypto adoption ramp.
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Singapore’s Central Bank Tightening
In the United States, the markets tumbled when the Fed announced interest rate hikes to tamper runaway inflation. Although Singapore’s inflation rate is at 1.46%, its version of the Fed, the Monetary Authority of Singapore (MAS), committed a tapering of its own on January 24th. That’s because its core inflation rate hit an 8-year high in December.
“There remain upside risks to inflation arising from the impact of pandemic-related and geopolitical shocks on global supply chains.”
Nonetheless, this was an unusual move, last done in January 2015, as an off-cycle tightening. Unlike the Fed which influences monetary policy with interest rates, the MAS does it through exchange rates by weakening or strengthening its Singapore dollar (SGD) against USD.
At the time, $S1 SGD traded at $0.7429 USD, the highest since October 2021. Presently, SGD is at $0.7420 USD. Interestingly, the MAS forecasts core inflation at 2 – 3% this year, the goal which the Fed first set in 2020, then abandoned after the “transitory inflation” rhetoric invited too much mockery.
Will the same happen to Singapore? Most probably not likely. Last year, Singapore’s economy grew by 7.2%, the fastest growth spurt in a decade. However, as a pre-emptive measure against supply chain constraints, the MAS expects another tightening in April.
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About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.