Out-Law / Your Daily Need-To-Know

Singapore's DBS bank will launch a digital exchange for digital assets to provide integrated tokenisation, trading and custody services for institutional investors and accredited investors.

The digital exchange will use block chain technology to provide a platform ecosystem to raise funds through asset tokenisation and secondary trading of digital assets including cryptocurrencies.

Tokenisation allows users to securely save their bankcard details with an organisation to make payments more efficient and quicker. A token – special identification symbols – is used to replace users' sensitive information.

The digital exchange system includes a regulated platform for security token offerings for the issuing and trading of digital tokens backed by financial assets such as bonds and private equity funds. The system also includes digital custody services that provide clients the custody of password-based keys that control digital assets. The assets that can be traded include four fiat currencies and four virtual currencies – bitcoin, ether, bitcoin cash and XRP.

DBS received approval from the Monetary Authority of Singapore (MAS) as a recognised market operator earlier this month.

DBS said that participation in the digital exchange will be limited to institutional investors and accredited investors. Singapore Exchange (SGX) will take a 10% stake in the DBS Digital Exchange. Trading activity will start this week.

Mark Tan of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law, said, "The recent launching of a digital exchange by DBS is an indication that traditional banks have recognised the trend towards the tokenisation of assets and are now looking for ways to tap into as well as grow their market share in this regard."

"Additionally, it also suggests a shift in the investment allocation of private wealth investor and clients of traditional banks, where such investors are now more open to investing in and holding digital assets and cryptocurrencies," he said.

"The entry of traditional banks into the digital assets arena as exemplified by this move by DBS is also likely to result in increased competition in the digital exchange and cryptocurrency trading space, particularly since traditional banks are likely to have deeper pockets as compared to existing digital exchanges," he said.

In September 2019, DBS launched its first multi-tier financing facility on block chain platform for helping firms in small and medium size in China get faster access to trade financing.