It’s no secret that the Monetary Authority of Singapore (MAS) has been frowning on retail investment into the crypto space. At almost every opportunity, MAS’ top executives have warned that they do not welcome crypto speculation and instead, would like to see more institutional investment and research in the ecosystem.
Many businesses have been complying with this stance. Tokenize Xchange has set up a separate platform for institutional investors, as Coinhako. DBS CEO Piyush Gupta also withdrew his previous statements on hoping to extend crypto trading services to retail clients.
But why is institutional investment so important for MAS, and do companies share this view? Furthermore, what is the institutional investment landscape like for the crypto ecosystem?
At a panel discussion during this week’s Singapore Fintech Festival, several executives at crypto companies gave their take.
The panellists include Annabelle Huang, Managing Director at Amber Group; Darius Sit, founder and Chief Investment Officer at QCP Capital; Samar Sen, Head of APAC for Talos; and Liu Yusho, CEO and co-founder of Coinhako.
Institutional involvement has been around longer than we think
While crypto has only seen a boom in recent years, with blue chip coins like Bitcoin and Ethereum surging in popularity and price, institutional involvement in crypto has been around for a while, Sit explains.
“Trading crypto and trading tokens is probably the widest and most significant use case for crypto, and institutions like CME were also early adopters,” he said. These companies were among the first to list cryptocurrencies on their platform, and represented one of the first votes of confidence in crypto.
Even when institutions themselves did not enter the space, crypto adoption and crypto markets grew as individuals and groups stepped up to mimic the function of institutions.
Sit credits the growth of the crypto credit market to “pseudo-institutional involvement”. While crypto did not have a credit rating by proper institutions, individuals on Twitter provided these credit ratings, which provided investors with some security and safety when investing into the space.
However, Sit also pointed out that this is not a substitute for proper institutional involvement, and that pseudo-institutional involvement is not perfect.
In fact, as Huang notes, much of the institutional adoption and involvement so far is still driven by western financial institutions.
Our client base is global because crypto is global, but there are clear differences between institutional adoption from Europe and America as compared to here in Asia. From the West, we see many hedge funds who are interested in buying crypto. But in Asia, it’s not so much the hedge funds and big banks, but more of high net worth individuals and family offices that are looking at the space.– Annabelle Huang, Managing Director of Amber Group
The crypto winter means it’s time to build
Where there is a boom, there is also the flip side: the bust. And the crypto world has not exactly been free from such events.
It would be hard for anyone in the space to ignore the turmoil that gripped the ecosystem after the Terra-Luna pair crashed in May. But as the panellists noted, this crash was qualitatively different from the rest.
The question that this downturn posed was not “will crypto as an industry survive?” but more of “what needs to be done to rebuild?” In other words, at least according to the panellists, cryptocurrency is already on stable footing, and no longer sees recessions as an existential threat.
Sen noted that while there is significantly less trading going on due to the crypto winter, there is still a massive intake of customers signing up for accounts. Since Talos services only institutional clients, this is an encouraging sign.
It proves that these companies view crypto favourably and that in the long term, crypto is something that is going to be part of what they do. What these companies want is to use the crypto winter to build.– Samar Sen, Head of APAC, Talos
Coinhako co-founder and CEO Liu Yusho also shared similar sentiments, pointing out that many traditional financial institutions are looking to hire digital asset teams, which indicates that they are planning to also become part of the Web3 ecosystem.
Will all assets become tokenised?
A point that the panellists were divided upon, however, was whether or not the future of financial assets would be tokenised — a point which Sen passionately believed in.
Asia has been a pioneer in the digital asset space for a long time, and I believe that other types of asset classes will come aboard the digital asset rails. Digital assets have so much to offer — there’s the idea of creating liquidity in illiquid markets, fractionalisation, and much more.– Samar Sen, Head of APAC, Talos
Citing his own experience dealing with Talos’ clients, Sen recalled that many traders were asking for traditional financial instruments to be tokenised.
This view, however, was not shared by his fellow panellists. Liu was the first to speak up, pointing out that while moving all assets onto digital asset rails might be ideal, the execution of such a process would not be as simplistic as it seems. There are many other issues to deal with, including the necessity for compliance and getting through regulations.
Huang offered further reasons for why the world was not yet done with traditional financial instruments, arguing that in contrast to Sen’s experience, there was no incentive for high quality assets to become tokenised.
While the digital asset space has certainly evolved, many high quality assets in traditional finance already see the adoption and interest that they need. So what’s the reason for them to move onto digital asset rails?– Annabelle Huang, Managing Director of Amber Group
As financial innovation moves onward, the panellists have provided important insights to developments in the crypto space, and asked even more important questions about where the industry is headed.
Despite the disagreements, it seems that the panellists are confident that the digital asset industry has planted its roots and is on solid ground, and this space will certainly be an interesting place to keep track of in the years to come.
Featured Image Credit: Vulcan Post