Private market exchange ADDX has become the first financial institution in Singapore to recognise cryptocurrency assets for the purposes of onboarding accredited investors.
The move opens the way for more individuals to qualify for accredited investor status. Subsequently, they can participate in more sophisticated investment opportunities in the private markets. These include asset classes such as private equity and venture capital funds, hedge funds and pre-IPO companies.
“At a time when the markets are volatile, this move is also designed to enable crypto investors to diversify into the regulated private markets, which tend to be more stable across different phases of market cycles,” said ADDX CEO Oi-Yee Choo, in a statement.
Three cryptocurrencies
As part of its process for verifying accredited investors, ADDX will begin recognising three coins – bitcoin, ether and USDC. The discount rates ADDX will apply when calculating the value of these crypto holdings is 50% for bitcoin or ether and 10% for USDC. These coins and discount rates will be reviewed at regular intervals and may be revised as market conditions change.
To qualify as accredited investors, individuals need to provide documents to show that the value of their net personal assets meets the S$2m threshold after the inclusion of crypto assets with the discount rate applied.
In line with regulations, ADDX will implement risk management measures that take into account the price volatility of crypto assets, according to the firm. For example, ADDX will recognise only cryptocurrencies with a “higher market capitalisation and will apply a discount rate when valuing the assets”.
Accreditation criteria
Under Singapore’s regulatory regime, individuals have to meet one of three criteria in order to qualify as accredited investors: their income in the past twelve months exceeds S$300,000, or their net financial assets exceed S$1m, or their net personal assets exceed S$2. While crypto assets are not currently recognised as income or financial assets, they can be recognised under the third category of net personal assets, said ADDX.
According to a global survey by Gemini, crypto ownership rose by more than 80% in 2021. Ownership rates have hit 30% in Singapore, 24% in Hong Kong, 20% in the US, 18% in the UK and 17% in Germany.
“With a large minority of investors owning crypto, it is reasonable for these digital assets to be recognised as a part of one’s portfolio – not unlike any other assets that can be valued in the marketplace, such as real estate or equity,” said Choo.
Founded in 2017, ADDX uses blockchain and smart contract technology, ADDX tokenises private market investments such as private equity funds, hedge funds, pre-IPO equity and bonds. It has listed around 30 deals on its platform including Hamilton Lane, Partners Group, Investcorp, Singtel, UOB, CGS-CIMB, as well as Temasek-owned entities Mapletree, Azalea and SeaTown.
The Singapore Exchange (SGX) backed company is regulated by the Monetary Authority of Singapore (MAS) as a digital securities exchange.
