Daniel Lee of DBS Digital Exchange: Moving from digital currencies to asset digitalization
Inside the Sell Side
Daniel Lee
Head of Business & Listing | DBS Digital Exchange (DDex) | DBS
Amitav is responsible for effective operations of the risk frameworks, policies, risk appetite and governance activities across the Group, and provides second line oversight of: country risk, climate risk and sustainability risk (including ESG), reputational risk, crypto-assets risk and insurable risks.
With asset tokenization and digitalization fast gathering pace, there are immense opportunities to reshape capital markets.
Q. Tell us about your role and what are your key priorities.
My key priorities are to acquire members for the exchange and to attract issuers who would want to raise funds through an STO (Security Token Offering). The DDEx was launched in December 2020 as part of an integrated digital asset ecosystem which leverages blockchain technology to provide clients with a secure and transparent platform to raise funds from the private market. It is a members-only exchange where we invite qualified financial institutions to join our ecosystem and provide access to the DBS DDEx to their end customer.
Through DBS’s DDEx, we offer a regulated platform for the issuance and trading of digital tokens backed by financial assets, such as shares in unlisted companies, bonds and private equity funds. We also facilitate spot trading of fiat currencies to cryptocurrencies and vice versa. Lastly, we avail to our members an institution-grade digital custody solution which leverages DBS’ experience in providing world-class custody services for conventional assets.
With asset tokenization and digitalization fast gathering pace, there are immense opportunities to reshape capital markets, and DBS is committed to accelerating the development of a fully integrated ecosystem to facilitate this.
Q. What are the benefits for issuers to raise funds through STOs, vs the typical fundraising options through equity and debt issuance?
The DBS DDEx presents an alternative fundraising regulated platform for prospective issuers, such as private companies, that might not yet qualify for a full IPO on a stock exchange. The issuer will be able to offer securities in the form of security tokens to prospective investors in return for a cash investment and have these security tokens listed and traded on the DBS DDEx. This could provide new liquidity and exit options for shareholders to monetize illiquid shares in unlisted companies.
We have reached a tipping point in the asset digitalization space, and more people are understanding how tokenization works.
Q. The exponential pace of asset digitalisation provides opportunities to reshape capital markets. What are some immediate opportunities?
I think we have reached a tipping point in the asset digitalization space, and more people are understanding how tokenization works and how it can fundamentally transform the fabric of the financial system. In the coming year, and frankly years to come, we will see more activity beyond the realm of just digital currencies as asset digitalization catches on in the institutional space.
Q. What role will technology play in the future of trading and how are you leveraging technology to generate revenue?
Going forward, I see algorithmic-based trading becoming more prevalent and widespread. At DBS’ DDEx, we provide Application Programming Interfaces (APIs) based on FIX protocol to enable traders to connect their trading systems directly to the exchange. DBS’ deep digital capabilities, underpinned by a strong digital infrastructure, places us in good stead to stay ahead of these trends.
Q. Where do you think things will be 5 years from now?
I anticipate that low latency trading will move to the digital space. In this context, collocation and proximity hosting will become more important, and high frequency trading strategies currently utilized in the equity and derivatives markets will be more widely employed in the digital space. Structured products on crypto currencies should also become more popular and I see traditional financial institutions making a move into the crypto-derivative and structured products space.