Digital Assets Update, 4Q22: As policy tightens
- From NFT to commerce in web3, new use cases keep emerging
- Sharp valuation loss notwithstanding, blockchain based applications are flourishing
- New crypto exchanges, backed by well-established brokers, are being set up
- Regulatory developments have picked up pace
- CBDCs trials are getting close to real world use both in EM and DM
The end of the easy money era has had a negative impact on risk assets, not sparing the digital world. Despite a few false dawns when the markets excepted inflation and policy rates to peak soon, it has been a difficult environment for stocks, bonds, credit, and even commodities. As the global economy and markets settle down for a higher-rates-for-longer narrative, digital assets have felt the chill acutely.
This has been particularly the case for private digital currencies. Like gold, which yields zero, digital currencies have found their attractiveness challenged by sharply rising nominal and real yields on safe assets like the US treasury. A substantial increase in correlation between the US stock market and bitcoin this year is an illustration of the risk-off sentiment. Crypto sentiments have also been hurt by economic slowdown worldwide, regulatory crackdowns, crypto fund failures, and some high-profile governance issues. As liquidity tightens and regulatory oversight increases, the exuberance seen in the sector in recent years is unlikely to return soon.
But innovations and ideas are by no means exhausted, even as fund raising becomes more challenging. Whether it is speculation over NFTs or commerce in web3, blockchain based payments solutions or addressing the energy usage of the Ethereum network, work continues unabated at the digital space. Blockchain-based games have exploded in south-east Asia, with the rest of the world taking note. A group comprising of some of the largest brokers in the US is backing a new crypto exchange called EDX Markets, aimed at safe and speedy trading of digital assets for US retail and institutional investors.
On the multilateral side, work on a framework for capital rules that covers banks wanting to hold and trade digital assets on behalf of customers is progressing, and likely to be finalised by the end of the year, as per the Bank for International Settlements. Central banks around the world continue to make progress in thinking through CBDCs’ role in facilitating monetary policy, financial inclusion, and cross-border trading of good and currencies.
In this quarterly update, we look at the latest market data on crypto valuation and usage, as well as regulatory developments. A crypto winter notwithstanding, digital assets remain a hotbed of activity.
To read the full report, click here to Download the PDF.
Subscribe here to receive our economics & macro strategy materials.
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). This report is intended for “Accredited Investors” and “Institutional Investors” (defined under the Financial Advisers Act and Securities and Futures Act of Singapore, and their subsidiary legislation), as well as “Professional Investors” (defined under the Securities and Futures Ordinance of Hong Kong) only. It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 13th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong SAR
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.