Singapore's largest bank DBS relies on crypto despite market collapse

Singapore's largest bank plans to expand its cryptocurrency and digital assets business despite the crypto bear market, saying it wants to expand its digital exchanges and offer services to more of its 300,000 wealthy customers in Asia.

Piyush Gupta, chief executive of DBS since 2009, said the downturn in the crypto market proved that established and regulated financial institutions, and not just start-ups, should offer products such as digital asset trading to retail investors.

The bank's brokerage arm received a cryptocurrency license from the Monetary Authority of Singapore last year, allowing its institutional and wealthy customers to access its DBS Digital Exchange by invitation.

Gupta said the bank has fewer than 1,000 members on the exchange but will soon offer the service to 300,000 of its wealthy customers across Asia, including private banks, accredited investors, other exchanges and funds through its DBS mobile banking app.

The app would make the process less cumbersome and quicker for customers and allow DBS to offer it to more customers, he said. DBS had total assets of S$686 billion (US$488 billion) as of December 2021.

The former Citibank executive, who served in senior banking roles across Asia, said DBS must support Singapore's push into cutting-edge financial technology. “People expect us to be a pioneer in this space and continue to push boundaries,” he said in an interview with the Financial Times.

The plans by DBS, in which state investment group Temasek has a nearly 30 percent stake, come as Singapore grapples with its messaging over its bid to become a crypto hub. The city-state, whose economy relies on financial services and trade, believes it must innovate to stay relevant.

But this year's collapse of several high-profile crypto groups, including Singapore-based Three Arrows and Terraform Labs, as well as declining valuations globally have raised questions about MAS's strategy.

In response, MAS chief executive Ravi Menon said last week that the regulator would take steps to protect retail investors while reaffirming the city's digital asset strategy.

Gupta described the challenges facing the country's regulators. "On the one hand, we want to be a global crypto hub. On the other hand, we are also very concerned about our domestic population being burned with this speculative asset class," he said.

Gupta said the losses suffered by retail investors in the crypto crash underscored the importance of more established financial institutions offering digital asset services. The total number of trades on the DBS Digital Exchange more than doubled from April to the end of June, while the amount of Bitcoin purchased on the exchange almost quadrupled. Likewise, the amount of Ether, another popular token, has increased by 65 percent over the same period.

"We thought carefully about who we brought in. My view is that we can do this for retail investors, but regulators don't necessarily see it that way," he said.

About $1 billion flowed out of DBS into global crypto exchanges run by companies like Genesis and Binance before the bank launched its own exchange, Gupta said. Engaging companies like DBS to put in place “guardrails” and safeguards would lead to “better outcomes”, he added.

“You might as well try to create frameworks and processes to make these available to everyone in a meaningful way, rather than having a regulated space and a cowboy room and letting everyone go into the cowboy room.”

Analysts warn that no regulator can protect against market risks. “Crypto is actually very volatile and needs to be fundamentally adopted by people who understand the risk,” said Nizam Ismail, founder of Singapore-based Ethikom Consultancy, which advises companies on compliance, adding that many banks have failed to do so.

Hypothetically, DBS could be safer for retail investors looking to trade cryptocurrencies, but it is difficult to judge, he added.

"What we really need is some kind of check or driver's license to ensure that [retail investors] understand the risks. That doesn't exist," said Zennon Kapron, director of Kapronasia,a financial technology research and advisory group. “Whether that comes from banks like DBS is another question.”