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DBS Bank's road to digital transformation: the banking industry will set off a new wave of encrypted finance

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How does Professor Li Guoquan from Singapore interpret DBS Bank's encryption business? What does this mean for the banking industry?

Original title: "The Road to Digital Transformation of DBS Bank: The Banking Industry Will Set Off a New Wave of Encrypted Finance"

Original Source: Babbitt

DBS Bank officially announced its withdrawal from the "all-round digital trading platform" on the 10th of this month, and said that its services will cover the issuance of securitization tokens and the two-way exchange of legal tender and cryptocurrency , digital asset custody, but only for qualified investors and institutional users to participate (the bank once published news on its official website that it would establish an encrypted digital asset trading platform in October, and later withdrew the announcement because it has not yet obtained regulatory approval).

As the largest commercial bank in Singapore, DBS has focused on digital innovation in recent years. Although the bank is not the first licensed institution in the world to provide encrypted digital currency trading services, but looking at Asia, DBS Bank has come to the forefront in the field of encrypted digital currency. DBS Bank stated that it will use blockchain technology to provide asset tokenization and secondary market transactions including digital assets such as cryptocurrencies, and form an ecosystem for fundraising, including securitization token issuance (STO), digital currency Transactions (exchange between SGD/USD/HKD/JPY and BTC/ETH/BCH/XRP), digital custody services and other services.

Nowadays, under the background of low global interest rates, the net interest margins of major banks are constantly shrinking. What does it mean for DBS Bank to enter the encrypted digital currency? Will it set off a new wave in the digitization process of traditional banks? On the 15th of this month, Hong Kong issued the first cryptocurrency license, which means that the compliance of encrypted finance in Asia has started. Next year, more traditional banks will provide cryptocurrency-related services.

1. DBS Bank’s Digital Strategy and Encrypted Finance

2008 1999 was the year of the birth of Bitcoin and a turning point in the development of the global banking industry.

Since the financial crisis in 2008, due to the double squeeze of the real economy and supervision, technology, and human investment, the days of high growth and high returns in the banking industry have basically come to an end. According to statistics from The Banker magazine, in the ten years after the financial crisis, the average ROA of the world's 1,000 largest banks has dropped to 0.8%, compared with more than 1% before.

The banking industry after the financial crisis has seen retail banks with Wells Fargo as the benchmark, but since Amazon, Facebook and other financial technology companies have entered the financial field, making Traditional banks in transition are facing new competitors.

PIYUSH GUPTA has served as President and CEO of DBS Bank since 2009. Started the process of digitalization, and is committed to becoming the "new Asian bank of choice", and the digital strategy is a necessary means to achieve its goal. In an exclusive interview with McKinsey in 2017, Goldbold mentioned blockchain technology, but at that time he believed that it would take some time to implement a recognized agreement and accumulate enough critical mass and participants. transforming into a distributed system".

In June this year, Gao Bode once again mentioned the blockchain at the 12th Lujiazui Forum, pointing out that Singapore can be tried as a hub for China's digital currency land. Not long after those remarks, Wells Fargo delivered its worst second-quarter report, its first quarterly loss since the 2008 financial crisis.

Bitcoin, meanwhile, emerged as the best-performing asset this year. In this context, DBS Bank announced its entry into the field of digital currency with a high profile.

According to this, Li Guoquan, a professor of Singapore Management University, told Babbitt that this will be the trend of all banks in the future. It is very large, which means that some people in traditional banks understand that this will be a future trend. Although it will not affect DBS Bank’s large business now, it can slowly absorb the professionals of the token economy and enter the new In addition, Singapore is particularly interested in the token economy, and from the perspective of banking payments and previous ICOs, Singapore is also an important node. Other countries already have encrypted banks, and Singapore has also begun to have payment licenses Take pictures with digital banks, but we haven’t seen many traditional financial institutions entering the scope of the token economy for the time being, but you can see that there are already two encrypted banks in Switzerland, SEBA and Sygnum, and these two encrypted banks also have close ties with Singapore.”

Sygnum and SEBA received the banking licenses of the Swiss Financial Market Supervisory Authority (FINMA) last year. These two encryption companies can issue, store, trade and manage digital assets. assets, and supports the exchange of multiple fiat currencies with cryptocurrencies, etc. Sygnum obtained a capital market service license in Singapore last year in order to provide asset management services for Asian countries; SEBA not only provides services in the Singapore region, but also signed a memorandum of understanding with Singaporean financial technology company Lightnet Pte. Enhance the latter's remittance settlement capabilities.

"These two can be said to be the first two encrypted banks in the world. They can not only do traditional banking, but also do encryption, investment banking, and brokerage. Business. These banks also have their branches in Singapore, and Sygnum has an asset management license. Singapore has always been at the forefront of financial innovation, and other countries have begun to have banks in this area, and of course Singapore has to follow. Since There are payment-type tokens, application-type tokens, and asset-type tokens (STO), which naturally require the existence of legal exchanges. We can also see that in this statement, DBS Bank will compare its own exchange with it. Custody is divided into two different units. In the future, decentralized exchanges and DeFi will be the trend.” Li Guoquan said.

Second, Encrypted Financial Compliance Road

DBS Digital The exchange is a membership exchange for institutional investors and qualified investors, and has obtained the "recognized market operator" license from the Monetary Authority of Singapore.

This means that if investors or issuers want to participate, they need to abide by the relevant regulations of Singapore. Relevant definitions refer to Singapore's "Securities and Futures Act", in which, for natural person qualified investors, it is required that the personal net assets exceed 2 million Singapore dollars or the financial gold assets exceed 100 million dollars, or the income in the last 12 months is not less than 3 million Singapore dollars Personal.

According to Li Guoquan's introduction, the specific identification must be passed by the Central Bank of Singapore. International investors can also participate in the DBS Bank Digital Currency Exchange, as long as they meet the local requirements of Singapore. Law, pass KYC and anti-terrorism audit, etc. If it is an issuer, it can do STO as long as it complies with the securities law. ”

Despite the opening of encrypted financial services, DBS Bank does not provide services 7*24 hours, which is different from the round-the-clock trading hours of encrypted digital currencies. "There is a big difference between the way the traditional financial market realizes 7*24 hours trading and the cryptocurrency exchange. For example, in traditional finance, from 9:00 a.m. to 5:00 p.m., you trade on the exchange. After 5:00 p.m., you go to other exchanges to open accounts to trade ADRs or stocks in the United Kingdom, the United States, and other places. In other words, in the long run, it should be a decentralized 7*24-hour transaction, but this requires more compliant traditional financial institutions to intervene and cooperate with each other to realize it. In the short term, traditional financial institutions are still exploring and developing, observing how to solve the private key custody and transaction of tokens on the blockchain. The future exchange is the business model of wallets, fund pools and smart contracts. "Li Guoquan said.

Following closely, Hong Kong issued the first cryptocurrency license in the middle of this month, and OSL of BC Technology Group was the first to obtain Enterprises with Type 1 (securities trading) and Type 7 (providing automated trading services) licenses issued by the Hong Kong Securities Regulatory Commission. It is worth noting that 10% of the shares of the digital asset trading platform established by DBS Bank belong to Singapore Exchange Held.

"Singapore Exchange sees that it will do STO in the future, and the other is derivative products and derivative indexes. Taking the lead, it may also be the forerunner in de-sinochem token business and DeFi in the future. Singapore has already made some arrangements in this regard, and SGX has invested in iStox, CIC and other projects. "Li Guoquan said.

Currently, many financial institutions have launched or will launch digital asset custody or transaction business, among which, those that have jointly launched custody business with their partners There is Nomura Securities, Standard Chartered Bank that clearly stated that it will launch custody business next year, and it is rumored that UOB Bank (Singapore’s third largest bank), JP Morgan Chase, Daiwa Securities, etc. are studying related businesses.

With the entry of more traditional financial institutions, the seeds of encrypted finance have been planted under the plane tree.