Casey Wagner

Singapore’s DBS Bank observed an 80% year-over-year increase in bitcoin traded on its members-only digital asset exchange in 2022, the firm reported Wednesday.&nbsp;



The DBS Digital Exchange, known as DDEx, is open to select accredited investors, financial institutions, and family offices. The exchange does not have services for retail investors. Despite unfavorable market conditions, in the second half of 2022, the DDEx reported a net buy position for all customers, the bank said.&nbsp;



DDEx became Southeast Asia’s <a href="https://blockworks.co/news/singapore-central-bank-ready-to-try-defi-after-crypto-giants-leave-for-dubai">first institutional-run</a> digital assets exchange when it launched in 2020. <a href="https://blockworks.co/news/singapores-dbs-reports-100-million-in-digital-assets-in-custody">In August 2021</a>, the exchange had roughly 400 institutional clients who completed around $133 million in transactions in the third quarter of 2021. Today, DDEx reports approximately <a href="https://blockworks.co/news/dbs-plots-20-to-30-annual-growth-in-digital-currency-exchange-customers">1,200 registered clients</a>.&nbsp;



<a href="https://blockworks.co/tag/dbs-bank">DBS</a> historically has offered digital asset exposure through cryptocurrencies and security token offerings (STOs), although the bank has paused the latter for the time being. 



“In 2022, we saw growing interest from our corporate clients and were actively working towards converting a number of enquiries into STOs,” Lionel Lim, CEO of DDEx, said in a statement. “However, these were put on hold given the market volatility as well as macroeconomic uncertainty. We will continue to work with these potential issuers as well as explore origination opportunities for high quality STO listings in 2023.”



The news comes as crypto companies around the world <a href="https://blockworks.co/news/regulators-speeding-up-crypto-timeline">brace for stricter regulations</a> following <a href="https://blockworks.co/news/crypto-wildest-moments-of-2022">last year’s slew of bankruptcies and implosions</a>, from FTX and Celsius to Three Arrows Capital. Fear of contagion and the speculative nature of crypto markets rocked investors and lawmakers, but DDEx is starting to see a positive turn in sentiment.&nbsp;



“We believe that the market has decisively shifted its focus towards trust and stability especially in the wake of multiple scandals that have rocked the industry,” Lim said.&nbsp;



DBS follows “industry best practices” when it comes to security and compliance, Lim said. DDEx does not custody any assets; all are held separately within the bank “using institutional-grade cold wallets,” he said. The bank and exchange are also up to date with anti-money laundering (AML) and know your customer (KYC) standards, they said in the statement.



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DBS Bank Reports 80% Growth in Bitcoin Traded in 2022

Shalini Nagarajan

<div id="highlights-block_62b2e6ef78284" class="highlights">
 <ul>
 <li>There are limits to what financial services can create in terms of content-driven experiences, DBS’ compliance head told Blockworks</li>
 <li>The firm expects to grow its tech-focused strength by an average of 1,000 employees annually over the next few years</li>
 </ul>
 
</div>



The struggles of the cryptocurrency market might currently be grabbing eyeballs, but companies haven’t lost sight of opportunities around the metaverse. More <a href="https://bankingblog.accenture.com/banking-in-the-metaverse-the-next-frontier" target="_blank" rel="noreferrer noopener">traditional banks</a> want to establish value-added financial services in the metaverse, and some are taking on the challenge of introducing financial interoperability between one or more digital worlds and the physical world.



Singapore-based DBS Bank, for one, believes the current narratives around the metaverse miss a fundamental point of putting humans at the center.&nbsp;



Lam Chee Kin, the head of legal and compliance at DBS Bank, wrote in a recent paper that he doesn’t entirely agree with the Web3-centered view of token or NFT-based play-to-earn gaming metaverses. He’s of the opinion that the virtual world gives humanity a promise of escapism and fulfills the need for more avenues for progression and achievement.



Having invested over 1 billion Singapore dollars ($722 million) on average over the past four years into its technology infrastructure — <a href="https://asia.nikkei.com/Business/Finance/Singapore-s-DBS-explores-metaverse-in-digital-push" target="_blank" rel="noreferrer noopener">including</a> the metaverse — DBS Bank expects its tech bench to grow by an average of 1,000 employees annually over the next couple of years.



Below is Blockworks’ conversation with DBS Bank’s Lam Chee Kin.



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Blockworks: How does DBS Bank plan to get involved in the metaverse?



Chee Kin: That’s a very nuanced conversation, but it’s key to note that it&#8217;s early days. What’s going to be critical is familiarity with underlying technologies, and this goes back to the idea of human-centeredness.



If the future is going to be represented by immersion technology, emergent delivery technology and digital asset technology, then DBS needs to be increasingly familiar with technological developments in each of these three areas.



The intent is to develop a digital assets capability that would be consistent with the future envisaged. Consequently, our people would need to pick up not only the technical skill sets but also need to develop adjacent skills, such as in the legal or regulatory space, in order to make the metaverse a reality. DBS is making moves in these areas in order to be ready for that future when it comes about.



Blockworks: Do you think metaverse-related investments will take time to reap solid returns?



Chee Kin: A few articles recently went into this and showed Big Tech appears to be going a bit slower on the metaverse than would have been expected relative to the excitement that existed about a year ago. Having said that, there&#8217;s no doubt that we&#8217;re in an inflationary environment, and a lot of value has come off stock prices. Right now, people are probably a bit more risk-sensitive in terms of making big moves into this area.&nbsp;



But you can’t just watch the tech companies. Another view posits that the metaverse is a perfect platform playing to the strengths of the big content brands — those that have created entire content franchises, or have had extensive experience building story universes.



Partner conversations are going to be relevant because there&#8217;ll be limits to what financial services can create in terms of a content-driven experience, but embedding financial services into a partner&#8217;s metaverse is also an equally valid proposition.&nbsp;



Blockworks: What names come to mind in Asia or in the world that you see dabbling in the metaverse today?



Chee Kin: Clearly China. If you look at the Chinese technology giants such as Baidu and Tencent, they all appear to be taking a socially-focused view and that&#8217;s interesting. South Korean banks have also made some public announcements around branch virtualization in the metaverse. So let&#8217;s say Silicon Valley is one angle, and China is definitely another.



Blockworks: What are the biggest risks that you see the metaverse facing today?



Chee Kin: There are a whole bunch of technical risks. Some are more obvious, such as the incredible amount of market volatility. Another would be worries of money laundering and criminal activity on the metaverse.&nbsp;



But in using the blockchain, there are opportunities that come with risks. When you become so transparent with activity on the blockchain, everything is written, everybody can see what’s going on, and there are good ways of managing these risks.&nbsp;



Another risk which is more abstract has to do with how digital reality interacts with physical reality. We’re all still human beings subject to the rule of law in the physical world. We&#8217;ll need to create a legal scholarship around this.



In terms of social risks, there’s a concept in online gaming called “griefing” — which means that the only reason a person plays an online game is to make other players&#8217; lives as miserable as possible. Computer gaming has known this for decades, and many game developers have become adept at designing griefing out of their games. We can similarly learn lessons on how to set up a metaverse that is as protected from griefing as possible.



In Japan, there’s a social phenomenon called hikikomori — the total social isolation of the individual. At the individualistic level, you&#8217;ve just got a person who&#8217;s addicted, or probably finds more value in his digital life than he finds in his physical life. Because of that value perception, he makes a conscious life choice to live in the digital world, and not the physical world. If you get all this withdrawal from society, then what happens to economic productivity? What happens to birth rates? We care about the unintended consequences of these moves.



Blockworks: What is your view on the current crypto market downturn?



Chee Kin: There have been winners and losers. Those with financial markets experience, who could handle the market and liquidity risk, will be able to come out of this in reasonably better shape.



But I think the people who perhaps underestimated some of the technical risks have probably suffered relatively worse. Bear in mind that actually the whole market, not just the crypto market, is being affected.



This interview is edited for length and clarity.



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Q&A: Southeast Asia’s Biggest Bank is Bullish on the Metaverse

Sam Reynolds

<div id="highlights-block_608c0a07f374a" class="highlights">
 <ul>
 <li>DBS said during its earnings that digital transformation is a key theme for post pandemic growth for the bank</li>
 <li>Volume is comparatively low because its institutionally focused and the bank is “careful” about who it brings on</li>
 </ul>
 
</div>



Singapore-based DBS Bank, one of Southeast Asia’s largest by market cap, gave some insights into its <a href="https://www.reuters.com/article/dbs-exchange-digital-idUSL1N2IQ0N2" target="_blank" rel="noreferrer noopener">digital asset trading desk that it launched late last year</a> during its earnings call on Friday.



The bank said that its trading desk, which is open only to professional investors and wealth managers in Singapore, has daily trading volume between 30-40 million SGD ($23-$30 million) with 120 investors onboarded.



In addition to offering cryptocurrency trading for bitcoin, ether, bitcoin cash and XRP in multiple regional currency pairs, the desk also offers digitized stocks and bonds. During the call Piyush Gupta, DBS’ CEO, said that while the numbers might seem small compared to Coinbase or some regional exchanges they are two different products.&nbsp;



“This is not a retail product, we are only open to professional investors and wealth managers,” Gupta said. “We’re being careful about who we bring on.”



DBS also said that it was working on extending the trading desk hours of the desk from Singapore business hours to 24-7. The bank wouldn’t provide exact figures about growth forecasts, but Guptra said that business is rising “steadily”.&nbsp;



A DBS spokesperson confirmed to Blockworks that the majority of clients are currently in Singapore, but there are EU based clients waiting to be onboarded. The most popular trading pairs are BTC-USD and ETH-USD, the spokesperson confirmed.



<h3 class="wp-block-heading">DBS doubling-down on digital transformation</h3>



While DBS’ earnings showed a relatively strong recovery for the bank as Singapore climbs out of the depths of the Covid-19 recession, Gupta emphasized that the bank was doubling-down on digital transformation as a way to accelerate its growth.&nbsp;



One initiative its undertaking is a platform called Partior, which it announced earlier today before the earnings. Developed in conjunction with JPMorgan and Temasek, Patriot — Latin for share — digitized M1 commercial bank money with an aim to provide nearly instant around-the-clock cross-border payments. In contrast, Central Bank Digital Currencies (CBDCs), which also provide similar functionality are a digitally-issued version of M0 money, or cash, instead of digitizing existing money.&nbsp;



“The current hub and spoke arrangement in global payments often results in delays as confirmations from various intermediaries are needed before a settlement is treated as final. This in turn has a knock-on effect and creates inefficiencies in the final settlement of other assets,” Gupta said in a statement. “By harnessing the benefits of blockchain and smart contracts technology, the Partior platform will address current points of friction.”



The bank plans to launch this platform in the third quarter of the year, and will initially target the Singapore dollar-USD currency pair before expanding.



<h3 class="wp-block-heading">Firing on all cylinders</h3>



Overall the bank said that earnings for the first quarter rose by 72% to SGD 2.01 billion from SGD 1.17 billion a year ago. Covid-19 hit Singapore, a trading hub heavily reliant on the free flow of people and product, hard as <a href="https://www.singstat.gov.sg/-/media/files/news/advgdp1q2021.pdf" target="_blank" rel="noreferrer noopener">government statistics</a> showed its economy by 5.4% during 2020. Its economy is expected to grow by 0.2% in the first quarter of 2021, but will eventually <a href="https://www.channelnewsasia.com/news/business/singapore-2021-growth-forecast-mas-economists-upgrade-14373494" target="_blank" rel="noreferrer noopener">recover to 6%</a> for the whole year according to forecasts.&nbsp;



“This has been an extraordinary quarter for our business as we fired on all cylinders. Loan and deposit growth was robust, fees were strong and treasury had a record performance. At the same time, we remained disciplined on costs while asset quality was resilient,” Gupta said during the call.