Singapore’s DBS Bank provides cryptocurrency trading, custody, and full life cycle services for securities-based tokens, which indicates that banking and securities businesses have begun to merge.
Original title: “From the perspective of DBS Bank to see the future integration of banking and securities business”
Written by: Gu Yanxi, founder of the American Liyan Consulting Company, a researcher and practitioner in the blockchain and encrypted digital asset industry
Singapore’s largest commercial bank DBS recently announced that it will provide a series of services in the field of encrypted digital assets, including trading some major encrypted digital currencies based on four legal currencies, providing custody services for encrypted digital assets, and providing security tokens Full life cycle service. Such an announcement proves the information previously revealed in an oolong way. Such a move shows that DBS Bank has adopted the correct strategy in the field of encrypted digital finance. This also shows the integration of future banking and securities business.
Among these businesses planned by DBS Bank, transaction business is the main component. Only the custody business is the area of the current banking business. This shows that DBS Bank is entering the field of digital asset trading, which is traditionally a field in the securities industry. It is very interesting that the company established by DBS Bank for this purpose has 10% of its shares owned by Singapore Exchange SGX. Therefore, in this new entity that provides digital asset trading services, the existing banks account for 90% of the shares, and the existing stock exchanges account for 10%. Such an equity composition shows that a commercial bank is a leader in this regard. It is grasping the trend of the integration of the banking and securities industries in the future, and strives to occupy a dominant position in the future encrypted digital financial ecosystem.
The future encrypted digital financial ecosystem will be based on distributed accounting technology as the underlying infrastructure. Digital currency will be used on top of it. The full life cycle services of digital assets will also be carried out on the same infrastructure. Users can use digital currency for daily payments, lending and digital asset transactions. Therefore, the businesses currently carried out in the banking industry and the securities industry will be carried out on the same infrastructure in the future. The distinction between the banking industry and the securities industry is not obvious. For existing financial institutions, whoever takes the leading position in this encrypted digital financial ecosystem will be able to maintain their leading edge in the future.
For commercial banks, due to the use of blockchain technology and digital currency, its current main deposit, loan, and foreign exchange business will be greatly challenged. The underlying market infrastructure based on blockchain technology directly provides the circulation mechanism of digital currency, and the circulation of digital currency does not require a clearing and settlement system between banks to complete. The user’s digital currency can be hosted in the bank’s wallet address, or managed in its own wallet, or directly invested in other institutions that can provide fixed income or variable income. Even the CBDC issued by the central bank can be directly issued to the user’s own wallet address without having to have an address under bank custody. Banks therefore need to compete with other service providers on the same infrastructure to obtain user deposits. In terms of loan business, users can obtain loans from individuals, private equity funds and other non-bank institutions, and can even use DeFi to obtain loans directly based on their digital asset mortgage. Therefore, banks will also face fiercer competition in the loan business. Therefore, for banks, in the future encrypted digital financial ecosystem, its traditional business will be greatly challenged (see my article ” Commercial Banks, Victims of the Blockchain Era “). But at the same time, the new financial ecology has also brought more room for banks to develop. It can enter the field of trading and develop more new types of business (see my article ” In the era of digital finance, commercial banks will be the main participants in digital asset transactions “).
Since the future financial business will be carried out on the same infrastructure, the banking business is no longer limited to the traditional deposit, loan and foreign exchange business. It can also carry out business related to digital assets. At each stage of the full life cycle of digital assets, that is, the generation, circulation, custody, transaction and settlement of digital assets, banks can provide related services. This is actually entering the current business area of the securities industry. The bank can use its existing advantages in systems, funds, and users to establish its own advantages in these business areas. The bank’s future business will be significantly different from the current business, but the business development space will be huge. DBS Bank obviously has a clear judgment on this development trend, so it began to provide encrypted digital currency and digital asset trading services.
As Singapore’s largest commercial bank, DBS Bank has many advantages in this regard. First of all, Singapore is a country that strongly encourages the development of encrypted digital finance. It has always encouraged the market to make various attempts in related fields. The Singapore government is also actively exploring the issuance of its CBDC. If it issues its own CBDC, it will be supported by the corresponding underlying infrastructure. It now appears that this underlying infrastructure is likely to be based on distributed accounting technology. And the high probability event is that this underlying infrastructure not only supports the issuance of CBDC, but also supports the generation of digital assets on top of it. Therefore, it is possible to use digital currency to trade digital assets. The DBS Bank project does not say what kind of underlying technology it will use, let alone what kind of relationship its underlying technology has with the underlying technology of Singapore CBDC. If the two use the same underlying technology, then DBS Bank’s business will proceed more smoothly. If the two are based on different technologies, I believe that there will be appropriate considerations in terms of interoperability, and the two will not be completely incompatible. Therefore, this business of DBS Bank will also be built on a relatively solid foundation in terms of underlying systems.
In terms of business, due to Singapore’s special status, DBS Bank will also provide very good support for multiple legal currencies from the beginning. In the digital currency trading business it plans to carry out, it will first support Singapore dollars, U.S. dollars, Japanese yen and Hong Kong dollars. Such a business model that supports multiple legal currencies is also a basic feature of the future encrypted digital financial ecology. This is because the operation of distributed accounting technology is carried out on a global scale from the beginning, so it needs to support the circulation and use of multiple legal currencies on it, and support users in different countries and regions to conduct business on it. Therefore, the characteristics of DBS Bank in this aspect are very conducive to its business in such an encrypted digital financial ecosystem.
In short, the current business of DBS Bank is very helpful for it to grasp the opportunities brought by blockchain and encrypted digital assets. The strategy it adopts is also very feasible. Therefore, it is very likely to continue to maintain its competitive advantage in the future encrypted digital financial ecosystem.
