DBS will begin trading over-the-counter cryptocurrency options and structured notes for qualified institutional investors and certified affluent clients.

It is the first Asian-based bank to offer financial instruments whose value is tied to the price of Bitcoin and Ethereum, the two most valuable cryptocurrencies by market capitalisation.

Customers currently use DBS to develop their digital asset portfolios by using the DBS Digital Exchange to trade security tokens and cryptocurrencies (DDEx).

Eligible clients who want to increase their exposure to the asset class can start trading options and structured notes in Q4 2024.

Clients may receive delivery of the underlying cryptocurrency or earn yield on cash, contingent on the structure of the product and fluctuations in cryptocurrency prices.

Custodians of Bitcoin and Ethereum with DBS who meet eligibility requirements might possibly earn yield through different options structures and hedge their investments against market volatility.

For example, a client looking to control the inherent volatility of Bitcoin can purchase a put option, which grants the client the right to sell Bitcoin at a predetermined price at a later time—even if values drop below the fixed price before then.

The debut of these products coincides with an estimated 50% increase in the market capitalisation of cryptocurrencies in the first five months of 2024. During the comparable time span, DDEx stated that the worth of digital assets traded on the exchange almost tripled in Singapore dollar terms compared to 2023.

Further, the number of active trading clients on DDEx increased by 36%, while digital assets held with DBS increased by more than 80% in Singapore dollars.

A net inflow of deposits from both new and returning customers looking for safe haven bank-grade platforms to trade and custodian digital assets propelled DDEx’s expansion.

Separate from DDEx, DBS uses institutional-grade cold wallets to securely hold its clients’ digital assets within the bank, adhering to industry best practices.

Jacky Tai, group head of trading and structuring, global financial markets, DBS, stated: “Professional investors are increasingly allocating to digital assets in their portfolios. Underpinned by DBS’ strong credit ratings and longstanding expertise in structuring solutions, these financial products are an expansion of the bank’s value proposition to provide clients trusted institutional-grade access to the digital asset ecosystem. Now, our clients have an alternative channel to build exposure to the asset class and incorporate advanced investment strategies to better manage their digital asset portfolios.”