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Crypto Demand Among Wealthy Clients Puts Pressure on Private Banks

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Affluent investors have putting a growing share of their wealth into crypto, many through online trading. But as their profits and stash grow, many are looking to institutionally focused custody and their wealth managers to tap deeper into the space.

DBS Private Bank’s assets under management (AUM) increased 12.7% in 2021, up from 7% growth in 2020, the Business Times reported on Monday, citing private banking group head Joseph Poon.

The bank also saw a 40% increase in net new money at its private bank, citing “robust” growth in key business areas, including in-house managed products and family office advisory.

Apart from growing demand for multi-asset, thematic and sustainable investment strategies, alternative assets such as cryptocurrencies are also gaining ground at DBS Private Bank, with Poon noting “healthy interest” from clients.

Wealth advisors are understandably put off by the extra risks and volatility that cryptocurrencies can add to a client’s portfolio, and there are concerns about how to store crypto safely. But this group is becoming too big to ignore.

As of end-December, DBS Digital Exchange (DDex) – Singapore’s first and only bank to have a digital asset exchange – had S$800 million (US$586.12 million) in digital assets under custody. DDEx currently offers exchange services between four fiat currencies and four cryptocurrencies: SGD, USD, HKD, JPY and BTC, ETH, BCH, XRP respectively. More coins and tokens will be added this year. However, its services is limited to accredited investors.

Metaverse red carpet

Last week, Blockhead reported that HSBC is launching a metaverse offering for the bank’s high net worth (HNW) and ultra HNW clients in Asia.

And despite previously expressing a negative stance towards cryptocurrencies, Goldman Sachs is also gearing up to launch crypto investment services for its high-net-worth clients, including over-the-counter Bitcoin options. The bank’s Wall Street rivals, Morgan Stanley and JP Morgan have already opened branches in the metaverse, with the former offering its wealth management clients access to bitcoin funds.

But private banks have their work cut out for them if they want to get their business, as major crypto exchanges have also been rolling out VIP services to cater to this clientele.