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Crypto Hub Race Heats Up as DBS Readies Digital Asset Licence Application in Hong Kong

Singapore's DBS has its sights on Hong Kong as the SG-HK rivalry to become the region's crypto intensifies.

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The race to become Asia's crypto hub continues as DBS plans to apply for a digital asset license in Hong Kong.

DBS, the largest bank in Southeast Asia, is seeking the license that would permit it to offer crypto trading to Hong Kong customers.

“We are planning to apply for a licence in Hong Kong so that the bank can sell digital assets to our Hong Kong customers,” said Mr Sebastian Paredes, chief executive of DBS Bank (Hong Kong), at a briefing in Hong Kong on Monday.

DBS established its crypto exchange in Singapore for corporate and institutional investors back in 2020. Last year, it extended the service to "wealth clients."

Read more: DBS Extends Crypto Trading From Corporate Investors to “Wealth” Clients

Although DBS investment strategist Daryl Ho said at the bank’s 4Q22 CIO Market Outlook that it’s currently “not the time to be taking crazy/risky bets with cryptocurrency,” the Singapore bank has made strong moves into the sector.

In November, DBS became one of the first banks globally to test the trading of FX and government securities using permissioned DeFi liquidity pools on a public blockchain through Project Guardian.

Read more: DBS Completes Industry Pilot With DeFi Liquidity Pools

HK vs. SG

Hong Kong has long rivalled Singapore as a digital asset hub in the region. Most recently, the city's government has mandated banks to arrange a debut offering of tokenized green notes.

Bank of China, Credit Agricole, Goldman Sachs, and HSBC will hold investor calls to raise HK$800 million (US$102 million) in Hong Kong's debut offering of tokenized green notes.

Read more: Banks Assemble for Hong Kong Sale of Tokenized Green Notes

Tron founder Justin Sun has championed China and Hong Kong's advances in the sector. In a recent tweet, Sun said that China's dominance in the space is becoming "more and more apparent", and signalled his intent to move to Hong Kong to "be closer to the action and take advantage of the opportunities in Asia market".

However, just like Singapore, Hong Kong is taking regulation seriously. Whilst Singapore's rules are arguably tighter, such as a ban on crypto advertising to a retail crowd, Hong Kong has not shied away from taking a strong stance.

In January 2o23, HKMA issued a discussion paper that set out its regulatory approach on crypto assets and stablecoins, and invited views from the industry and public on the relevant regulatory approach.

Read more: Hong Kong Sets Out Strict Rules for Stablecoins

Algorithmic stablecoins, which are stablecoins that derive their value based on arbitrage or algorithm, will not be accepted in the new regime, HKMA said, noting that it will  "continue to monitor market developments and the risks that different categories of crypto-asset may pose to monetary and financial stability."

Nonetheless, Paredes said that when the regulations in Hong Kong are clear and the bank “understands exactly the framework,” DBS will be one of the lenders interested in participating.