SINGAPORE - As digital tokens gain acceptance, Singapore's DBS Group intends to quadruple the number of participants on its new cryptocurrency trading platform to 1,000 by the end of December, and to grow by 20-30 percent annually for the next three years.

DBS top executives said in an interview that the DBS Digital Exchange, which opened as a members-only market in December, is witnessing strong demand from corporate investors, certified individuals, and investment institutions that handle the fortunes of wealthy families.

"We are fast expanding. Cryptocurrencies and digital assets are becoming increasingly popular among investors "Eng-Kwok Seat Moey, the exchange's chairperson and head of capital markets at DBS, Southeast Asia's largest bank by assets.

DBS's move into crypto comes after CEO Piyush Gupta led the bank to invest billions of dollars in IT infrastructure upgrades over the last eight years as it adopted cloud computing and digitised its services.

In a crypto industry where investor trust is still low, DBS Digital Exchange promotes itself as the world's only bank-backed full service digital bourse, including cryptocurrency trading, asset tokenization, and digital custody services.

The rising popularity of cryptocurrencies has created a challenge for traditional banks as they struggle to balance their customers' desire for digital coins with regulatory concerns about their risks.

Standard Chartered is establishing a joint venture to provide a cryptocurrency brokerage and exchange platform in the United Kingdom and Europe, whereas HSBC has stated that it has no plans to offer consumers digital currencies.

DBS' position as one of Asia's largest wealth managers, as well as its competence in originating capital market deals, will help it attract users and increase trading volume, according to Eng-Kwok.

The decision comes as DBS, like other banks, seeks to increase fee-based revenue as net interest income falls due to low interest rates.

By the end of 2022, the bourse intends to offer at least a half-dozen security tokens, according to Eng-Kwok.

Singapore's central bank implemented a new regulatory framework for cryptocurrency enterprises in January 2020.

Under the new environment, DBS' brokerage arm has acquired preliminary permission, allowing it to actively assist asset managers and enterprises in trading digital payment tokens on the market. The Singapore Exchange owns a 10% share in the stock exchange.

"Having mainstream banks helps nurture an environment where settlement risk is limited and there are safeguards in place for custody of customer deposits and transaction security," said Ganesh Viswanath-Natraj, an assistant professor of finance at the University of Warwick in the United Kingdom.

After the central bank told it to stop offering payment services, Binance, one of the world's largest cryptocurrency exchanges, announced last week that it will restrict its services in Singapore https://www.reuters.com/world/asia-pacific/binance-removes-singapore-products-main-platform-after-regulators-warning-2021-09-06 days.

DBS Digital Exchange allows users to trade bitcoin, bitcoin cash, ethereum, and XRP for dollars, Singapore dollars, Hong Kong dollars, and yen.

"Our goal was to build a platform that could support the entire digital asset value chain, from deal origination through tokenization, listing, trading, and custody – all within a trusted and regulated bank franchise," said DBS group head of strategy and planning Kwee Juan Han.

DBS saw an opportune opportunity to establish the bourse because of a trend of firms investigating fundraising alternatives using tokenised assets, as well as increased interest among private investors to increase the share of digital assets in their portfolios, according to Han.

By the end of next year, DBS expects its new operations, which include a digital exchange and a carbon exchange, to generate total revenue of S$350 million ($260 million).

($1 = 1.3432 Singapore dollars)