Speaking of the tsunami-like subprime mortgage crisis twelve years ago, it seems that everything is still vivid. The reason is that Lehman Brothers, the fourth largest investment bank in the United States, declared bankruptcy with a huge debt of US$613 billion. Immediately afterwards, the subprime mortgage crisis spread to the world, and DBS Bank, which is closely related to Lehman Brothers, was also affected. After being forced to announce that it did not recognize any responsibility, it agreed to a settlement plan and provided up to 2,160 qualified investors who have purchased Lehman bonds. The huge compensation of 651 million Hong Kong dollars has avoided the end of further enforcement by the Securities Regulatory Commission.
I believe that since then, DBS Bank has engraved this painful lesson forever, and began to try to find other ways like “Nakamoto”. Today, DBS Bank has finally chosen to “enter” the emerging financial technology industry after ten years of brewing. On December 10, 2020, DBS Bank suddenly announced the launch of a comprehensive digital trading platform in cooperation with Singapore Exchange (SGX), aiming to create a comprehensive digital asset tokenization, trading and trading platform for institutional clients and qualified investors. Custody ecosystem to create asset tokenization and secondary market transactions including digital assets such as cryptocurrencies, with four legal currencies (Singapore dollar, US dollar, Hong Kong dollar, Japanese yen) and the four most mature cryptocurrencies ( Bitcoin, Ethereum, Bitcoin Cash, Ripple) provide mutual exchange services.
As the largest commercial bank in Southeast Asia, it is no accident that DBS chose to enter the emerging financial technology industry. You must know that the largest shareholder behind DBS Bank is actually the sovereign fund giant Temasek Holdings with a Singaporean government background. Temasek has been in the digital currency and blockchain industries for a long time and secretly launched the “experimental cabin” project two years ago. Aims to explore investment opportunities in the blockchain industry. Not only that, Temasek also established a US$80 billion blockchain fund with Google, Blackstone Group and the Rothschild family a year ago; and announced its membership in the Libra Association (now renamed the Diem Association) in May this year. Afterwards, it completed the issuance of US$300 million in digital bonds with the digital asset platform of the Singapore Exchange.
As DBS expands its tentacles into the emerging digital currency trading market, other traditional financial institutions are not to be outdone: US regulators have recently relaxed restrictions on digital currencies, allowing national banks of all sizes and the Federal Reserve Association Custody of cryptocurrency, several well-known traditional banks including US Bank and PNC have expressed their intention to provide customers with cryptocurrency custody and other services; in addition, China Construction Bank also plans to issue 3 billion US dollars of digital securities and support the use Bitcoin is subscribed on the digital currency exchange.
First of all, from this cross-border integration of DBS Bank and digital currency exchanges, it is not difficult to see that since “Satoshi Nakamoto” created Bitcoin after the global financial crisis, traditional financial institutions have been aware of market changes and have begun to be active. Embracing digital currency, if you do not make changes, will be swallowed up by the wave of the times. Imagine that in the past 12 years, the market value of cryptocurrencies led by Bitcoin has increased from 0 to 560 billion U.S. dollars, and DBS Bank’s total assets in 2015 were only 458 billion SGD, or about 350 billion U.S. dollars. It is almost equal to the current market value of Bitcoin. If Bitcoin were merely speculative, it would not be possible to last for such a long time.
We found that although DBS Bank has entered the market, the limitations of its digital trading platform cannot be ignored. Currently, only three services, namely the issuance of securitized tokens, digital currency trading, and digital custody, can be implemented, which means that they currently only It is a compliant exchange that solves the needs of users for fiat currency deposits, and it is temporarily difficult to meet the needs of users for more digital currency transactions. According to the CEO of DBS Group Piyush Gupta, DBS Bank’s digital currency trading currently does not plan to open to retail investors for investment. It is only available to institutional investors and qualified investors who have a better understanding of asset attributes. In other words, DBS Bank has not fully opened the door to digital currency transactions, and still upholds the attitude of “half of the face”.
Secondly, in terms of digital currency transactions, DBS Bank currently only provides four legal currencies and four digital currency exchange services, which is difficult to meet today’s market transaction needs. However, digital currency exchanges have long been at the forefront of the market in the issuance of securitized tokens. For example, Bittrex and FTX have launched tradable securitized tokens, and users can purchase them through U.S. dollars, Bitcoin or USDT at any time, including Alibaba, Pfizer, Apple, Tesla, S&P 500 ETF, Facebook, Google, Netflix, Amazon and other world-renowned companies; in addition, Coinbase launched the professional custody service Coinbase Custody in 2018. The asset custody platform Anto reached a strategic cooperation and was underwritten by Nordisk Insurance, the world’s largest private insurance brokerage company.
Of course, the limitation of traditional financial institutions is that it is temporarily difficult to meet the “diversity” and “innovative” needs of digital currency transactions. The demand for cryptocurrency trading is very diverse. Users who like quantitative trading will choose to go to the Poloniex exchange; users with contract trading needs may choose a large digital currency contract trading platform such as BitMEX or OKEx; and they want to try copycats. For cryptocurrency transactions, they may visit digital currency exchanges such as Matcha and Kucoin; those who wish to have a better cryptocurrency spot trading experience will choose mainstream currency trading platforms such as Kucoin or Binance. However, traditional Financial institutions do not have these characteristics at all.
Thirdly, due to the influence of regulations and bureaucratic structure, it seems that it is difficult for traditional financial institutions to compete with digital currency exchanges in terms of “innovative”. The blockchain technology itself is an innovative technology. If artificial intelligence and big data can be combined on this basis, many digital currency exchanges will be even more powerful. For example, the Kucoin Exchange recently launched an artificial intelligence-based grid trading robot APP internal test activity, allowing AI to recommend trading parameters, and only need to select a trading pair and determine the amount of investment to complete the grid trading strategy setting. In addition, Kubi Robot also supports the automatic transfer of funds from Bibi account to robot account. After the transaction ends, trading funds will also be automatically transferred from the robot account back to Bibi account, in order to ensure that the grid trading profit exceeds the handling fee. , The robot will also automatically calculate the range of pending orders combined with big data for users’ reference, helping users better formulate the best investment strategy.
Finally, due to the short entry time and the uncompleted trading ecology, DBS Bank is also aware of the problem of insufficient digital currency ecological construction. They hope that through cooperation with the Singapore Exchange, they can make full use of blockchain technology and market infrastructure to form a fund-raising ecosystem and promote the realization of the transformation of a fully integrated ecosystem as soon as possible. In contrast, the trading ecology of digital currency exchanges has basically taken shape, which can provide investors with diversified investment tools and traders with trading tools required by different scenarios.
Of course, on the other hand, the existence of digital currency exchanges is still inseparable from the direct or indirect support of financial institutions. They have always maintained inextricably linked relationships. damage. As long as the legal currency transaction business is involved, bank services must be inseparable. The bank account is an important bridge for the digital currency exchange to realize the exchange of legal currency and digital currency. If the bank account of the digital currency exchange is closed, then the transaction of buying and selling digital currency is basically The above is impossible to complete, and investors and traders will eventually choose to leave the market. Just as the Central Bank of India previously banned bank payment systems from providing digital currency services, the country’s digital currency trading volume plummeted. Therefore, as long as operating an exchange that supports fiat currency and digital currency exchange, banks are a necessary factor.
It is worth mentioning that since the scale of assets and the number of users of traditional financial institutions far exceeds that of digital currency exchanges, its admission will also increase the scale of the digital currency market. At this stage, although it seems that digital currency exchanges have a certain market advantage, if they really want to compete head-to-head with traditional financial institutions, they are obviously still a little “self-defeating.”
We have indeed seen that many digital currency exchanges are now actively building traditional financial partners, such as: Bittrex has signed a cooperation agreement with the New York Commercial Bank Signature Bank, allowing some corporate customers to directly use US dollars to purchase cryptocurrencies; Kucoin and Russian payments The service provider PayMIR has reached a cooperation to launch the ruble deposit service, and has also received the strong support of the two traditional venture capital giants of Jingwei Venture Capital and IDG Capital; Huobi and the Russian Development Bank Vnesheconombank cooperate to promote the establishment of a nationally endorsed digital asset exchange; And Bithumb is a service partner with Korea Agricultural Cooperative Bank.
It has to be said that the launch of DBS Bank’s digital currency trading platform is a milestone event. It represents the mainstream market finally accepting digital currency, because only when traditional financial institutions incremental users enter the digital currency market does it mean that the real Prosperity is coming, and this evolution of the business landscape has now begun. Banks no longer use traditional thinking to do new financial technology businesses. Digital currency exchanges can also not stick to conventions because they are afraid of regulatory constraints and avoid cooperation with compliant financial institutions.
Although there will be more and more competition thereafter, there is no doubt that the border between digital currency exchanges and traditional financial institutions will become increasingly blurred in the future. Don’t be afraid of breaking the “boundary”. This is not a good thing. It may promote traditional financial institutions and digital currency exchanges to enter a new state of symbiosis and win-win, allowing the industry to move to a higher dimension. The beginning of the launch of digital currency exchanges by established financial institutions such as DBS Bank and Standard Chartered Bank fully demonstrates that the sense of boundary between each other is gradually weakening. Opportunities are only when there is competition, and whoever can adjust the strategy in a timely manner can control the future.
