Financial institution recognizes crypto assets

PRIVATE market exchange ADDX has become the first financial institution in Singapore to recognize cryptocurrency assets with the aim of onboarding accredited investors.

This decision paves the way for more people to qualify for accredited investor status. They could thus participate in more sophisticated investment opportunities in private markets, which tend to be more resilient in times of market volatility. These include asset classes such as private equity and venture capital funds, hedge funds and pre-IPO companies.

“Cryptocurrencies are here to stay,” said Oi-Yee Choo, CEO of ADDX. “They no longer only exist on the fringes of conversations about wealth and investing. With a large minority of investors owning crypto, it makes sense that these digital assets should be recognized as part of one’s portfolio – much like any other assets that could be valued in the market, such as real estate or stocks.In line with ADDX’s mission to democratize private market investing, recognizing crypto assets helps us serve a segment much wider range of investors – not just investors with traditional holdings, but also those who hold crypto.At a time of volatile markets, this move is also designed to allow crypto investors to diversify into the markets regulated private sector, which tend to be more stable through different phases of market cycles.”

In accordance with the regulations, the ADDX would implement appropriate risk management measures taking into account the price volatility of crypto-assets. For example, ADDX would only recognize cryptocurrencies with a higher market capitalization and apply a discount rate when valuing assets.

Under Singapore’s regulatory regime, individuals must meet one of three criteria to qualify as accredited investors: their income over the past 12 months exceeds SG$300,000, or their net financial assets exceed $1 million SG, or their net personal assets exceed SG$2 million. Although crypto-assets are not currently recognized as income or financial assets, they could be counted in the third category of net personal assets.

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As part of its accredited investor verification process, the ADDX would start recognizing three coins – Bitcoin, Ether, and USDC. The discount rates applied by ADDX when calculating the value of these crypto assets are 50% for Bitcoin or Ether and 10% for USDC. These coins and discount rates would be reviewed at regular intervals and may be revised based on changing market conditions. To qualify as accredited investors, individuals could provide documentation proving that the value of their net personal assets meets the thresholds of S$2 million after the inclusion of crypto assets with the discount rate applied.

The latest development comes at a time when crypto ownership rates are at record highs around the world. According to a global survey by Gemini, crypto ownership increased by over 80% in 2021. Ownership rates reached 30% in Singapore, 24% in Hong Kong, 20% in the US, 18% in the UK United and 17% in Germany. .

“As a regulated financial institution that understands blockchain technology, ADDX is well positioned to bridge the two worlds – traditional finance and digital assets,” Choo said. “Investors increasingly expect a transparent view of all of their holdings, as their traditional wealth and their crypto wealth ultimately belong in one portfolio. They want the best of both worlds. Last year, ADDX listed our first crypto-exposed fund, and today we are recognizing crypto assets for accredited investor verification.These steps are part of a more strategic and comprehensive crypto roadmap for ADDX. Going forward, we will likely allow clients to fund their investment portfolios with cryptocurrencies and convert their assets between fiat and crypto currencies.”