DBS Bank to Offer Crypto Options and Structured Notes for Institutional Clients
Singapore’s DBS Bank is set to expand its digital asset offerings in the fourth quarter of 2024, introducing over-the-counter (OTC) cryptocurrency options trading and structured notes for eligible institutional investors and accredited wealth clients. This move positions DBS as the first Asian-headquartered bank to provide financial products linked to the prices of Bitcoin and Ethereum, the two largest cryptocurrencies by market capitalization.
The new products will complement DBS’s existing digital asset services, which currently allow clients to trade cryptocurrencies and security tokens via the DBS Digital Exchange (DDEx). With the addition of options trading and structured notes, eligible clients will have more sophisticated tools to gain exposure to the cryptocurrency market and manage their digital asset portfolios.
Jacky Tai, Group Head of Trading and Structuring at DBS, explained the rationale behind the new offerings: “Professional investors are increasingly allocating to digital assets in their portfolios. These financial products expand our value proposition, providing clients with trusted institutional-grade access to the digital asset ecosystem.”
The cryptocurrency options will enable clients to hedge their positions against market volatility. For example, investors could purchase a put option, granting them the right to sell Bitcoin at a predetermined price on a future date, even if the market price falls below that level. This strategy can help mitigate potential losses in volatile market conditions.
Structured notes, on the other hand, are debt securities whose returns are tied to the performance of underlying cryptocurrencies. Depending on the product structure and market movements, clients may earn yield on fiat currency or take delivery of the underlying cryptocurrency.
DBS’s decision to launch these products comes amid significant growth in the cryptocurrency market. The bank reported that in the first five months of 2024, the value of digital assets traded on DDEx nearly tripled compared to the same period in 2023. Additionally, the number of active trading clients on DDEx grew by 36%, while digital assets custodied with DBS surged over 80% in Singapore dollar terms.
To ensure the security of clients’ digital assets, DBS employs industry best practices, including the use of institutional-grade cold wallets for custody, separate from the DDEx platform.
It’s important to note that these new offerings will be limited to eligible institutional clients and accredited clients of DBS Private Bank and DBS Treasures Private Client. The bank advises potential investors to carefully assess their investment objectives, risk appetite, and financial situation before engaging with these products.
As the cryptocurrency market continues to evolve, traditional financial institutions like DBS are adapting to meet the growing demand for digital asset services. This move by DBS reflects the increasing integration of cryptocurrencies into the broader financial landscape, particularly for institutional and high-net-worth investors seeking more sophisticated investment and risk management tools in the digital asset space.
