In brief
- Singapore bank DBS is tokenizing structured notes on Ethereum.
- The notes will give investors exposure to crypto markets.
- DBS is the latest TradFi institution to move into the tokenization space.
Singaporean bank DBS will tokenize structured notes using Ethereum, the company announced Thursday.
The bank said it had partnered with digital platforms ADDX, DigiFT, and HydraX to distribute the product.
Structured notes blend debt securities and derivatives contracts to provide investors with exposure to a range of assets, including stocks and commodities. They are linked to an underlying asset and pay the investor a regular return.
With DBS’s latest product, the underlying asset will be cryptocurrencies.
“The note structure provides investors with a cash payout when cryptocurrency prices rise, enabling them to build exposure to the asset class without having to manage any cryptocurrency,” the bank said. “The note is also structured to mitigate potential losses should cryptocurrency prices decline.”
DBS said that by tokenizing such assets, they can become “more fungible and easier to trade.”
“Asset tokenisation is the next frontier of financial markets infrastructure,” DBS’ Head of Foreign Exchange and Digital Assets, Global Financial Markets, Li Zhen, said.
“Our first tokenised product, a crypto-linked note, also addresses the growing institutional appetite for digital assets,” he added.
DBS did not immediately respond to Decrypt’s request for comment.
The bank isn’t the first to offer such a product. Wall Street giant BlackRock, the world’s biggest fund manager, debuted its first tokenized fund last year. Its USD Institutional Digital Liquidity Fund runs on Ethereum. And BlackRock CEO and one-time crypto skeptic Larry Fink has repeatedly spoken about tokenizing assets.
Other major financial services firms are also exploring tokenization initiatives, including Bank of America and Citi. In a report this May, the World Economic Forum said that tokenization had “the potential to unlock the next generation of value exchange in financial markets.”
“While barriers remain, momentum continues to build, and financial institutions, policy-makers and technology providers need to coordinate regulation, interoperability and consumer protections to safely usher in this evolution,” the authors of “Asset Tokenization in Financial Markets: The Next Generation of Value Exchange” wrote.
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