The new options trading and structured notes will only be open to accredited wealth management clients, and certain institutional customers. The move is another example of cryptocurrencies becoming more "mainstream."

DBS said this week that it is going to launch over-the-counter (OTC) cryptocurrency options trading and structured notes for eligible institutional investors and accredited wealth clients. The lender says it is the first Asian bank to offer financial products whose value is linked to the price of bitcoin and Ethereum.

The Singapore-listed bank said clients currently build digital asset portfolios with DBS by trading cryptocurrencies and security tokens via the DBS Digital Exchange (DDEx). However, from the fourth quarter of this year, eligible clients will be able to use options and structured notes. 

Depending on the product’s structure and cryptocurrency price movements, clients may earn yield on fiat currency or take delivery of the underlying cryptocurrency.

Eligible clients using DBS as a custodian for bitcoin and Ethereum can also hedge exposure against market volatility and potentially earn yield through various options structures. 

For instance, a client seeking to manage the inherent volatility of bitcoin may buy a put option, which gives the client the right to sell bitcoin at a fixed price at a future date, even if bitcoin prices fall below the fixed price by that future date.

The move to develop such ideas highlights how cryptocurrencies, while volatile, continue to be a feature of the world’s meanstream financial services industry.

“Professional investors are increasingly allocating to digital assets in their portfolios. Underpinned by DBS’ strong credit ratings and longstanding expertise in structuring solutions, these financial products are an expansion of the bank’s value proposition to provide clients trusted institutional-grade access to the digital asset ecosystem,” Jacky Tai, group head of trading and structuring, global financial markets, DBS, said. “Now, our clients have an alternative channel to build exposure to the asset class and incorporate advanced investment strategies to better manage their digital asset portfolios.”

DBS said that the market capitalisation of the world’s cryptcurrency space has risen by about 50 per cent in the first five months of this year. During this same period, DDEx reported that the value of digital assets traded on the exchange nearly tripled in Singapore dollar terms as compared to the same time in 2023. 

The number of active trading clients on DDEx grew 36 per cent, while digital assets custodised with DBS rose by more than 80 per cent in Singapore dollar terms.

Cryptocurrency options trading and structured notes will only be available to eligible institutional clients and accredited clients of DBS Private Bank and DBS Treasures Private Client.