Citi expects global digital asset trades to hit US$2 trillion a day; DBS sees volume surge in H1

[SINGAPORE] In a white paper released this week, Citi projected that in five years, the world will see US$2 trillion in digital assets held or traded in a single day. The figure, which excludes equities, will mark a liquidity jump of about 20 to 30 times from today.

Citi’s fifth edition of its Securities Services Evolution white paper polled 537 post-trade industry leaders. These included infrastructure operators, custodians, banks, broker-dealers, asset managers and institutional investors.

The white paper details an increase in digital asset usage by the post-trade industry, which consists of the services, technologies and processes that complete financial transactions after a trade is executed. The trend is not only applicable globally, but also in Singapore.

In Singapore, DBS’ clients executed more than US$1 billion in trades in its Ethereum tokenised and crypto-linked structured notes in the first half of this year alone.

The bank, which said that volumes jumped 60 per cent from the first to second quarter, launched tokenised structured notes on the Ethereum public blockchain on Aug 22 amid growing interest in crypto investments in the Republic. A year ago, it also widened access for investors with its cryptocurrency-linked structured notes for eligible clients, alongside cryptocurrency options trading.

Similarly, OCBC in August introduced a US$1 billion digital US commercial paper (USCP) block-chain programme. The bank thus became the first USCP issuer in the world to use blockchain through the securities’ entire lifecycle, from issuance and settlement to record-keeping and servicing.

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Respondents to Citi’s survey expect “new venues to outgrow traditional ones in the coming years in all assets except for equities”. Half of them expect to conduct their digital asset activities across multiple, interconnected networks, “with little or no central players”.

The report added that about 15 per cent of the respondents in Asia expect to be able to use cryptocurrencies to fund their exchange-traded activities by 2030. However, questions remain on whether the region’s financial infrastructures can facilitate that.

Across the world, digital ledger technologies including blockchain are currently focused on stablecoins, tokenised collateral and fund tokenisation. These three areas have a “clear and compelling” business case, Citi said.

The Asia-Pacific region was flagged as a leader in digital asset adoption, thanks to an “extensive” retail take-up of cryptocurrencies and regulatory efforts to deploy digital asset projects.

Global respondents expect digital assets and tokenised securities to comprise 10 per cent of market turnover by 2030. However, 28 per cent of Asia-Pacific respondents expect digital and tokenised securities to comprise about 9 per cent of turnover by that time, lower than the global average.

Gen AI in trade settlement

Citi also found that more than half of the post-trade industry expects financial market infrastructures (FMIs) around the world to be “core enablers” of digital markets for fixed income and equities. Tokenisation of equities is expected to have the fastest growth through existing FMIs, while cryptocurrencies are expected to grow the fastest through new venues.

The white paper also noted that the Asia-Pacific region has led the world in digital asset adoption, thanks to retail take-up of cryptocurrencies. One of the companies highlighted was Singapore’s Fundnode, which offers tokenised access to any fund in the world.

The use of generative artificial intelligence (Gen AI) for client onboarding in the post-trade industry may be a strong starting point, before its use is extended into back-office operations, said the Citi white paper.

Citi said the use of Gen AI for client onboarding in the post-trade industry can bridge the onboarding speed gap between retail and institutional clients, noting the poor momentum in previous automation attempts.

About 86 per cent of the respondents in the white paper said they are running Gen AI pilots in their businesses, with more than half using Gen AI in a live environment. 

The report found that while Gen AI is already being used extensively for client onboarding, its adoption is not as prevalent in back-office functions. Only 57 per cent of respondents said they are piloting Gen AI in the post-trade space, with just 24 per cent of respondents using it in a live environment.

In contrast, 83 per cent of broker-dealers, 63 per cent of custodians and 60 per cent asset managers polled said they are using it for client onboarding. Two-thirds of institutional investors and broker-dealers polled are also using it for post-trade reconciliation and reporting.

Singapore is expected to announce a plan for the so-called “T+1” transition (that is, settlement of trades will be completed one business day after the trade date), said Citi. India started the transition in 2023, and China has been at “T+0” since 2014.

MAS in 2024 also committed an additional S$100 million to support the development of quantum technology and AI in the financial sector.

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