Ravi Chandran
Although Bitcoin cannot be omitted from investment discussions, the Bank asks investors to have full mental acceptance that it is possible to lose these funds
The bank said that terms such as “fringe”, “alternative”, and “experimental” tend to no longer apply when the assets such as Bitcoin reach trillion-dollar valuations.
Bitcoin is down 30 per cent this month, and has lost over 37per cent from its record high of almost US$65,000 hit in April. But it climbed back above US$40,000 on Wednesday for the first time this week, Fears of a crackdown in China and concerns over the environmental impact of Bitcoin production are among the reasons for the cryptocurrencies slump in recent weeks. Bitcoin and cryptocurrency prices suddenly surged in this past few hours, bouncing back after a brutal week wiped more than $1 trillion from the crypto market.
DBS banks however, pointed out last week that diversification to allocate funds to Bitcoin is an “opportunity that [fiat] money cannot buy”, but that investors will also require “full mental acceptance that losing these funds would be well within the realm of possible outcomes.”
DBS Chief Investment Officer Hou Wey Fook said: “Bitcoin has become history’s most polarizing asset after the tulip in the mania of the 1630s … While technological adoption, an increasingly digitalized economy, and institutional acceptance are all narratives that have fueled the surge in Bitcoin, undergirding it all is the longstanding trend of monetary debasement that has plagued not just the U.S., but various other major economies around the world as well.”
“To the bears, it is worth considering that Bitcoin’s blockchain technology is indeed revolutionizing finance as we speak, while characteristics of decentralization, security, limited supply, and digital nature render it unique properties that are near impossible to find substitutes for,” Hou wrote. “To the bulls, the future is still rife with uncertainty with Bitcoin’s scalability, volatility, regulatory, and geopolitical risks all serving as roadblocks to widespread adoption.”
Hou Wey Fook
The report noted that Bitcoin had exhibited generically low correlations with a broad range of asset classes, and that despite extreme bouts of volatility, allocating even a small portion of a portfolio into Bitcoin would augment the risk-return profile of an investor’s holdings.
Amid rising interest in cryptocurrencies, DBS Private Bank has introduced a trust solution for the asset class via DBS Trustee – the bank’s wholly-owned, licensed trust company – to enable its private banking clients to invest, custodise and manage their digital assets in a safe, secure, and structured manner.
This offering is Asia’s first bank-backed trust solution for cryptocurrencies, and builds on the DBS Digital Exchange (DDEX). Launched in December 2020, the industry-leading DDEX enables institutional investors and accredited investors to tap into a fully integrated tokenisation, trading and custody ecosystem for digital assets.
DBS Private Bank’s new trust offering applies only to cryptocurrencies hosted on DDEX (namely Bitcoin, Ether, Bitcoin Cash and XRP), and clients can work closely with DBS Private Bank to integrate these assets into their wealth succession plans.
The offering builds on DDEX’s existing proposition for private banking clients, which provides security and transparency for crypto-assets with institutional-grade safekeeping and custodial services, and robust due diligence on the chain source.
Joseph Poon, Group Head of DBS Private Bank, said, “In recent years, more clients have expressed interest or are already invested in digital assets, and we expect this trend to accelerate as cryptocurrencies turn more mainstream. Our trust structure allows clients to conveniently hold these assets, with a peace of mind that they will be safely managed and passed on to their intended beneficiaries.”
“As trusted advisors to our clients, we are very much committed to staying ahead of the curve and supporting their evolving investment needs. As we navigate today’s rapidly changing world and an ever-broadening array of investment opportunities, ensuring the long-term growth and protection of our clients’ wealth remains a keystone of our proposition.”
With the trust solution, clients can also be assured that critical information about their digital assets (including access instructions, passwords, and information on the types of digital wallets, online exchanges and wallet back-ups, etc.) will be kept confidential after their passing.
This is because trusts are kept out of the probate process and do not normally become part of the public record. This also saves clients’ beneficiaries from having to deal with potential complexities that could arise during the probate process, which include jurisdictional estate taxes.
Lee Woon Shiu, Regional Head of Family Office, Wealth Planning and Insurance Solutions at DBS Private Bank, said, “Confidentiality, peace of mind and taxation often emerge as top-of-mind concerns in our conversations with clients, and we would advise them to set up trust structures rather than wills, which are subject to the probate process.”
“This is especially so considering that international regulations and protocols are still nascent in the digital asset space, which could give rise to complications or unnecessary confusion if proper measures are not in place to prevent them. By keeping their DDEX-hosted digital assets in a trust administered by professional licensed trustees such as DBS Trustee, our clients can be assured that the succession planning of their digital asset wealth is being taken care of by experienced professionals.”
DDEX has enjoyed steady growth since its launch: as of the first quarter this year, it holds SGD 80 million in assets under custody, with trading volumes up 10-fold to SGD 30 – 40 million. It currently has 120 clients and a robust pipeline awaiting onboarding. Investors can also look forward to an enhanced DDEX experience in the coming months, as efforts to conduct its first security token offering as well as expand operating hours (from Asian time zone to round-the-clock) are underway.
Mr Paul Ho, chief officer at iCompareLoan, said: “The solution offered to DBS Private Bank customers comes at a time when cryptocurrencies are more volatile. China for example, has banned financial institutions and payment companies from providing services related to cryptocurrency transactions, and warned investors against speculative crypto trading.”
“The Chinese Government said that the volatility of cryptocurrency has the potential to seriously infringe on the safety of people’s property and disrupting the normal economic and financial order. But such moves by China seems to have not dampened the interest in cryptocurrencies”
DBS announced in December last year that it will set up a digital exchange, enabling Institutional Investors and Accredited Investors to tap into a fully integrated tokenisation, trading and custody ecosystem for digital assets.
With the DBS Digital Exchange, DBS will leverage blockchain technology to provide an ecosystem for fund raising through asset tokenisation and secondary trading of digital assets including cryptocurrencies. This includes:
Security Token Offerings – 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.
Digital Currency Exchange – Cryptocurrency trading that will facilitate spot exchanges from fiat currencies to cryptocurrencies and vice versa. The DBS Digital Exchange will offer exchange services between four fiat currencies (SGD, USD, HKD, JPY), and four of the most established cryptocurrencies, namely Bitcoin, Ether, Bitcoin Cash and XRP.
Digital Custody Services – An institution-grade digital custody solution to meet the increasing demand for secure custodial services tailored for digital assets under their prevailing regulatory standards. Leveraging DBS’ experience in providing world-class custody services for conventional assets, DBS’ digital custody services provide the custody of cryptographic keys that control digital assets on behalf of clients.
The announcement follows the in-principle approval by the Monetary Authority of Singapore to recognise DBS Digital Exchange as a Recognised Market Operator, allowing it to operate organised markets for assets such as shares, bonds and private equity funds.
