Private market exchange ADDX has become the first financial institution in Singapore to recognize cryptocurrency assets for the purpose of onboarding accredited investors.

The move opens the way for more individuals to qualify for accredited investor status. They can thereby participate in more sophisticated investment opportunities in the private markets, which tend to be more resilient in times of market volatility. These include asset classes such as private equity and venture capital funds, hedge funds, and pre-IPO companies.

In line with regulations, ADDX will implement appropriate risk management measures that consider the price volatility of crypto assets. For example, ADDX will recognize only cryptocurrencies with a higher market capitalization and will apply a discount rate when valuing the assets.

Under Singapore’s regulatory regime, individuals have to meet any 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$1 million, or their net personal assets exceed S$2 million. While crypto-assets are not currently recognized as income or financial assets, they can be recognized under the third category of net personal assets.

As part of its process for verifying accredited investors, ADDX will begin recognizing three coins – Bitcoin, Ether, and USDC. The discount rates ADDX will apply when calculating the value of these crypto holdings is 50 percent for Bitcoin or Ether and 10 percent 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 can provide documents to show that the value of their net personal assets meets the S$2 million thresholds after the inclusion of crypto assets with the discount rate applied.

The latest development comes at a time when crypto ownership rates are at record levels worldwide. According to a global survey by Gemini, crypto ownership rose by more than 80 percent in 2021. Ownership rates have hit 30 percent in Singapore, 24 percent in Hong Kong, 20 percent in the US, 18 percent in the UK, and 17 percent in Germany.

FinTech democratizes access to investments as capital shifts toward private markets, says Oi Yee Choo of ADDX [Q&A]

ADDX CEO Oi-Yee Choo said: “Cryptocurrencies are here to stay. They no longer exist only on the fringes of wealth and investment conversations. With a large minority of investors owning crypto, it is reasonable for these digital assets to be recognized 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. In line with ADDX’s mission of democratizing private market investing, recognizing crypto holdings helps us to serve a much wider segment of investors – not just investors with traditional holdings, but those who hold crypto as well. 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.”

Ms. Choo added: “As a regulated financial institution that understands blockchain technology, ADDX is well-positioned to bridge the two worlds – traditional finance and digital assets. Investors increasingly expect a seamless view of their complete holdings because their traditional wealth and crypto wealth ultimately belong to a single portfolio. They want the best of both worlds. Last year, ADDX listed our first fund with exposure to crypto, and today we are recognizing crypto assets for accredited investor verification. These steps form part of a more strategic and comprehensive crypto roadmap for ADDX. In time to come, we are likely to enable customers to fund their investment wallets with cryptocurrencies and to convert their assets between fiat currencies and crypto.”

Founded in 2017, ADDX is Asia’s largest private market exchange. Using blockchain and smart contract technology, ADDX tokenizes private market investments such as private equity funds, hedge funds, pre-IPO equity, and bonds. The resulting efficiency allows the platform to reduce minimum investment sizes from $1 million to $20,000. ADDX has listed more than 30 deals on its platform involving blue-chip names such as 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.

SGX-backed ADDX tokenizes first private credit fund, lowers minimum from $5M to $20K