With this move, SGX hopes to bridge the gap between regulated financial markets and the crypto sector. And this comes at a timely moment as evolving US policies, particularly under the Trump administration’s pro-cryptocurrency agenda, have boosted institutional demand for exposure to digital assets. However, SGX is not the first exchange to venture down this path. In January 2024, EDX Markets, a digital asset firm backed by Citadel Securities, revealed plans for the instruments in Singapore.
In Europe, the London Stock Exchange (LSE) has shown openness to the crypto market by declaring its intention in March last year to consider applications for Bitcoin (BTC) and Ether (ETH) cryptocurrency exchange-traded notes (ETNs). Similarly, SIX Digital Exchange (SDX), operated by the Swiss stock exchange group SIX, has been actively collaborating with partners to build a new market infrastructure for digital assets on a global scale and supports various types of digital assets, including tokenized securities and cryptocurrencies. Just last month, SIX launched its Digital Collateral Service (DCS), which integrates SDX's custody solution with SIX's triparty agent service, enabling financial institutions to optimize their collateral usage across both crypto and traditional securities. This marks a major step forward for the institutional adoption of crypto as institutions will not need to use a separate platform for crypto collateral management and they will also receive enhanced protection in cases of default.
The integration of cryptocurrencies and digital assets into traditional stock exchanges brings both opportunities and challenges. It offers increased liquidity, transparency, and efficiency in trading these new asset classes. However, it also raises questions about regulatory compliance, particularly in areas such as anti-money laundering, prudential regulation, and investor protection.
As the lines between traditional finance and the crypto world continue to blur, stock exchanges are playing a crucial role in bridging the gap. By embracing blockchain technology and digital assets, they are not only adapting to changing market demands but also shaping the future of global finance. This evolution is likely to continue, with more exchanges expected to explore and integrate crypto and digital asset offerings in the coming years.