DBS Views Tokenized Finance as the Future

Regulatory uncertainty remains the primary challenge.

DBS Group Holdings Ltd., Southeast Asia's largest bank by assets, believes a tokenized financial ecosystem is inevitable. However, it highlights fragmented regulations and unclear definitions of digital currencies as major hurdles.

Rachel Chew, Group Chief Operating Officer and Head of Digital Currencies at DBS Bank's Global Transaction Services, noted that client demand for digital assets has shifted over the past decade—from niche crypto enthusiasts to mainstream institutions.

"With increasing regulatory clarity, traditional businesses, large institutions, and high-net-worth clients are eager to include digital assets in their portfolios," Chew stated during a virtual interview.

Tokenization, which divides assets into blockchain-based fractional units, enables 24/7 fund movement—unlike traditional finance systems that pause during weekends and holidays, Chew explained.

DBS first explored digital assets in 2016 through Singapore's Project Ubin, a blockchain initiative for payments and securities. The bank later joined Project Bloom to test tokenized commercial bank money and stablecoins.

In 2020, DBS launched its digital exchange platform for institutional and accredited investors, providing cryptocurrency trading and post-trade services.

Chew outlined DBS's digital asset capabilities: token issuance and listing, trading, custody, payment/settlement management, and ecosystem support. She noted that digital asset firms still require banking relationships, positioning DBS as a potential reserve bank for the sector.

Chew identified regulatory inconsistency as the biggest obstacle: "We lack standardized digital asset definitions." Current regulations vary globally, often focusing on token redemption rather than cross-border functionality.

Standards remain unclear for instruments like stablecoins and central bank digital currencies (CBDCs). DBS contributed to Hong Kong's October 2023 token standards framework through an industry working group.

"This was progress, but we need instrument-level standardization," Chew emphasized.

Banks lacking technical expertise may struggle to participate, while private digital currencies risk undermining public trust in monetary systems. Chew cautioned that decentralized platforms like Ethereum differ fundamentally from traditional money.

DBS participates in SWIFT's Digital Ledger initiative alongside 36 other banks, helping design blockchain architecture that complements existing fiat networks. The bank is also testing bilateral token swaps with JPMorgan Chase, enabling cross-bank deposit token conversions.

"Standardization will face challenges before improving," Chew predicted. "Until then, fragmentation will persist."

Despite obstacles, tokenization offers clear benefits: fractional ownership expands investment access, real-time settlements enhance liquidity, and blockchain infrastructure may reduce operational risks.

DBS's digital exchange caters to growing institutional demand, now extending beyond crypto firms to wealth managers and corporations diversifying portfolios.

While individual institutions are experimenting, Chew stressed that widespread adoption requires coordinated efforts among regulators, banks, and market players to accelerate standardization.

"Participants must collaborate more intensely to establish standards faster," Chew concluded. "This remains the critical hurdle before overcoming fragmentation."