By Ganesh Iyer, Chief Marketing and Strategy Officer, IPC Systems

Digital adoption and innovation have taken a quantum leap at both the organisational and industry level. Both retail and institutional investors have moved dramatically towards online channels, and this has meant that businesses have had to adapt. The pandemic has only necessitated digital transformation, accelerating innovation in the digital assets space and increased adoption rates. Cryptocurrency trading is growing exponentially, and institutional firms seeking Alpha are increasingly prioritising Crypto trading.

In a contactless world, the vast majority of interactions with customers and employees must take place virtually. With rare exceptions, operating digitally is the only way to ensure business continuity and longevity. Although this mandate is nothing new, it has been brought into sharp focus. Prior to the pandemic, a paradigm shift towards digitisation of the economy was already underway. Singapore continues to emerge as a key cryptocurrency hub in Asia with its positive attitude towards cryptocurrencies and blockchain. Compared to many other APAC countries, Singapore has taken a more proactive approach to cryptocurrencies, with the 2021 Monetary Authority of Singapore’s (MAS) Payment Services (PS) Act providing a stable regulatory licensing and operating framework.

In a 2021 Cryptocurrency Index surveyed by the Independent Reserve, 93% of Singaporeans had heard of cryptocurrency with 43% already owning it. As such, Singapore is poised to further its reputation as a leader in the space with license applications from leading digital assets exchanges from around the world already submitted and 76% of Singaporeans between the age of 26-35 believing that cryptocurrencies will become widely available by businesses and people. 

Elsewhere, there has been a greater degree of hesitancy when it came to fully embracing digital assets such as cryptocurrencies and NFTs. Reasons spanned from the digital assets and DeFi space not being fully understood, to the fact that digital assets are based largely on speculation, and therefore a risky investment foray. Today, that narrative has changed; 40% of people are planning to use digital assets in the coming year, according to Mastercard's New Payments Index. In particular, 67% of millennials said they are more likely to use digital assets now compared to a year ago.

Not only did COVID-19 make small retail investors increasingly interested in digital assets, but for the first time since the financial crisis in 2008, institutional investors became open to crypto investments, pouring hundreds of millions into the industry and the DeFi space. Looking ahead, the market will likely begin to gravitate towards crypto platforms that are seeing the highest growth from a usage standpoint, rather than solely from an investment standpoint. This dynamic will distinguish the ‘momentum machines’ from crypto platforms with real technical value.

What’s fuelling the current digital assets, and in particular crypto craze, is largely a combination of an ambivalent regulatory environment, a global bubble and low or no barriers to entry, all magnified by the ubiquitous smartphone and cheap data availability. From an institutional perspective, there has been a demand for tailor-made investment products. Although there has been a slow cautious approach to digital assets in general, there are clear indications that institutional investors have officially entered the market. It’s a clear case of FOMO (fear of missing out); the risk of not participating in this space holds more risk than involvement with this new asset class.

Barriers that held institutional adoption back have been removed. The digital asset market is now equipped with institutional-grade custody and infrastructure providers. In APAC especially, there has been growing interest for institutional-grade cryptocurrency surveillance and trading options servicing.

APAC is cementing its status as a crucial region for digital asset innovation, with cities such as Singapore and Hong Kong cementing their status as FinTech and innovation hubs in the region. As the digital assets market keeps expanding, crypto trading strategies are also becoming increasingly complex. There’s been interest from investors in cryptocurrency arbitrage, those looking for low-risk yields and are seeking out tools that can help them with this. As a market that never closes, Cryptocurrency trading firms must be equipped for a multitude of scenarios – making reliable deterministic low latency a crucial ability so as to dominate. Firms need to successfully bridge the pricing gaps across various exchanges, which are located at points all over the globe, which is why they need an industry-leading, technology-forward solution to ensure their ability to extract profits is maximised.

Large vendors such as Mastercard are now making digital assets available on its network, announcing in February that they plan to begin supporting some cryptocurrencies. Since then, the company has shown an increasing interest in digital assets.

The pandemic, which has exacerbated the economic downturn has driven increased adoption of digital assets. The world is showing signs of distrust towards the current financial system, and government-backed fiat currencies, which have been weakened and vulnerable to inflation. Ultimately, this has what’s driven more public companies, and institutional investors to diversify their reserves into this new asset class. The digital economy is here to stay, whether or not it will replace the current financial system in the future is open to debate. However, what is clear, those institutional players that want to participate are only willing to do so if there is a level of risk mitigation and compliance baked into investment strategies and processes.