For DBS Bank, providing bitcoin transaction services not only has practical and long-term commercial value, but also helps its business expand globally.
Original title: “Why did DBS Bank launch Bitcoin transactions? 》
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 Bank, has recently entered the field of encrypted digital finance. The business in this area it plans to launch includes three contents. First, it provides transaction services for a few mainstream encrypted digital currencies including Bitcoin, and uses Singapore dollars, Japanese yen, U.S. dollars and Hong Kong dollars to provide transaction services for these encrypted digital currencies. Second, provide custody services for encrypted digital assets. Third, it plans to start STO business, which is to provide full life cycle services for encrypted digital assets, including generation, circulation, registration, custody, trading and settlement.
DBS Bank’s strategic choice to enter the field of encrypted digital finance is correct. But from the perspective of DBS Bank’s planned business, it also provides bitcoin transaction services. For a traditional mainstream financial institution, this choice is not a very natural choice. If we look at the choices of some other mainstream financial institutions in this regard, we can see that providing Bitcoin transaction services is not a common choice. For example, SDX in Switzerland has no plans to provide bitcoin transaction services. For example, among the first batch of encrypted digital asset exchanges approved to be established in Thailand, some exchanges chose to only provide STO services. For traditional financial institutions entering the field of encrypted digital finance, whether to provide bitcoin transaction services is not only a technical and compliance issue, but also a result of subjective choice.
Mainstream financial institutions have been operating within the existing financial system, so the factors that determine their thinking include business considerations, compliance considerations and traditional financial thinking. Such traditional financial thinking includes the judgment of the essence of a product, that is, whether it has intrinsic value, whether it is a purely speculative tool, or even a Ponzi scheme. For Bitcoin, an emerging trading product, traditional thinking still believes that it is a purely speculative product without any intrinsic value, so it cannot be used as a mainstream financial product. The most representative view in this regard is Buffett’s view. He believes that Bitcoin is the square of rat poison. Similarly, the current Governor of the Bank of England, Andrew Bailey, believes that Bitcoin has no intrinsic value. Another representative viewpoint in this regard is that of Nouriel Roubini, Ph.D. Doomsday of New York University. He still believes that the Bitcoin bubble will burst soon. This view is very representative among mainstream financial institutions. This in turn affected their judgment on the value of Bitcoin as a financial product or asset and its future. Under the domination of such thinking, these financial institutions may therefore not be willing to get involved in providing bitcoin transaction services now. Therefore, we will see that when some mainstream financial institutions enter the Canadian currency digital finance field, they will provide services that are compliant and they believe are long-term valuable. In the transaction field, we have therefore seen that some financial institutions only provide STO services, but not Bitcoin transaction services, although they can provide Bitcoin transaction services in accordance with local regulations. But apparently DBS Bank did not choose not to provide bitcoin transaction services.
For institutions like DBS Bank, the provision of Bitcoin transaction services not only has practical and long-term commercial value, but can also help its business expand globally.
In the short term, providing Bitcoin transaction services can generate direct profits. Bitcoin’s transaction business has now developed into a mass commodity business, which means that transaction services in general can no longer generate good commission income. In this regard, due to the high level of competition in the market, it is no longer profitable to provide bitcoin trading services. Therefore, emerging trading platforms in the market are now providing bitcoin derivatives trading services. But despite the general market, for DBS Bank, it can still earn commission income by providing bitcoin transaction services. DBS Bank has 11 million users and 240,000 institutional customers. Its consumer banking and wealth management businesses have assets under management of US$86 billion. It is fully able to provide related services of encrypted digital currency to institutional customers and high net worth customers. And such user groups usually did not conduct trading services on non-compliant or market-influential trading platforms.
As Singapore’s largest commercial bank, DBS Bank has its influence in the market. The bitcoin transaction service it provides will therefore allow institutional customers to use it with confidence. DBS Bank not only provides transaction services in this regard, but also provides custody services. Such a set of services will make institutional investors feel more at ease and convenient to use its trading services. And such transaction user groups are willing to pay commissions for this. So for DBS Bank, providing Bitcoin transaction services can still help generate very good commission income. In this regard, the successful experience of Square and PayPal in the United States shows this.
In the long run, providing bitcoin transaction services is not only a profit-generating business, but also helps it expand globally. Bitcoin has been international since the beginning. Users in any corner of the world can participate in bitcoin trading. In the field of encrypted digital finance, the scope of business development has also been global from the beginning. This includes the global circulation of digital currencies and digital assets, as well as the global transactions based on digital currencies and digital assets. The DeFi business, which is currently developing steadily, achieves the completion of transactions between any two users on the blockchain through technical means. Therefore, from the perspective of technology and application development, the development scope of encrypted digital financial services must be on a global scale. Of course, in order to truly realize such applications, global development also requires the approval of corresponding financial regulatory jurisdictions and the participation of corresponding service providers, but such a development trend is affirmative. For an organization operating in the world of encrypted digital finance, it needs to be prepared in terms of technology, business, market, and compliance. In the course of such preparation and advancement, providing trading services for a product that is traded on a global scale like Bitcoin will help establish its own market position on a global scale now.
DBS Bank already has a very strong competitive advantage in this regard. Its current banking business has been operating in multiple financial regulatory jurisdictions and has customers from all over the world. And now it can provide a variety of exchange channels for legal currency and encrypted digital currency. These factors are very helpful for it to provide encrypted digital financial services, that is, not only to provide this service to existing customers, but also to expand new users. Therefore, for Xinzhan Bank, providing bitcoin transaction services can not only generate current profits, but also provide an effective tool for its global expansion in the field of encrypted digital finance.
