SINGAPORE - South-east Asia's largest bank DBS will launch a digital currency exchange that will allow investors to trade in cryptocurrencies and firms to raise funds through asset tokenisation.
The crypto exchange is expected to start as early as next week, while the securities platform will be set up in the next few months.
The blockchain-based DBS Digital Exchange will allow institutional and accredited investors to access an integrated tokenisation, trading and custody ecosystem for digital assets.
It will provide a regulated platform for the issuance and trading of digital tokens backed by financial assets such as shares in unlisted companies, bonds and private equity funds.
The service will also enable spot exchanges between four fiat currencies - the Singapore dollar, US dollar, Hong Kong dollar and Japanese yen - and four established cryptocurrencies: Bitcoin, Ether, Bitcoin Cash and XRP.
It will also provide digital custody services to hold cryptographic keys that control digital assets on behalf of clients.
The Singapore Exchange will take a 10 per cent stake in the DBS Digital Exchange.
The bank has received in-principle approval from the Monetary Authority of Singapore for DBS Digital Exchange to operate organised markets for assets such as shares, bonds and private equity funds.
DBS chief Piyush Gupta said that the bank's size and capabilities allow it to build volume and liquidity, and scale the exchange in a way that is difficult for bespoke digital exchanges.
He added that the launch of the exchange is an important step for DBS as it presents a huge opportunity for the bank to grow its presence in a large market.
"Over the last few years, the private capital market has been growing exponentially and more companies would rather stay private than go public," Mr Gupta said on Thursday (Dec 10).
"A large chunk of funds is now being raised in Asia, and the growth of private equity here is much faster than in other parts of the world. The fact that there is a lot of private capital lends itself to the possibility of monetising and creating liquidity in it," he said.
The global daily trading value on the world's digital exchanges ranged from US$50 billion (S$67 billion) to US$100 billion last year.
This is not DBS' first foray into digital assets. In May, it joined local blockchain trade-finance network Contour, which digitalises global trade processes such as the creation, exchange, approval and issuance of letters of credit.
Last year, it also launched its first multi-tier financing facility on a logistics blockchain platform to help small and medium-sized enterprises in China get faster access to trade financing.
SGX-backed digitised securities platform iSTOX welcomed DBS' entry into the digital assets space.
Ms Choo Oi Yee, its chief commercial officer, said: "With increasing adoption globally, we expect to see more institutional players turning to digitised securities as their primary mode of issuing new equity and bonds, and more investors building portfolios that consist of diversified digitised investment products."
Mr James Gillingham, co-founder and chief executive of local cryptocurrency brokerage firm Finxflo, said: "While some may argue that the entrance of institutional players into crypto trading may edge out existing exchanges over time, we feel that there are multiple cross-business synergies to be explored."
For example, existing crypto exchanges can share their innovative tech solutions and market insights given their greater exposure to crypto trading, he said, while traditional financial institutions can lend their expertise in building secure platforms that comply with national regulations.