Cryptocurrency: Institutional interest in crypto picks up pace

This article first appeared in Wealth, The Edge Malaysia Weekly, on May 24, 2021 - May 30, 2021.

 

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Sinegy, one of three licensed digital asset exchanges in Malaysia, onboarded its first institutional client recently. Interest is growing. Thus far, a financial institution, a proprietary trading desk and a start-up are also setting up a corporate account with the exchange.

“Institutional investors are embracing cryptocurrency at a much faster pace on the back of the bitcoin price rally and listing of Coinbase (a cryptocurrency exchange platform operator in the US) on Nasdaq in April,” says Kelvyn Chuah, co-founder of Sinegy.

In March this year, FA Advisory Sdn Bhd, the Malaysian branch of Singapore-based independent financial advisory firm Financial Alliance Pte Ltd, opened a corporate account with Sinegy, allowing the company to trade cryptocurrencies by deploying funds in its treasury.

FA Advisory also onboarded its financial advisers with the exchange to provide their clients with the option to allocate some of their money into cryptocurrencies — an asset class primarily seen as having low or no correlation to traditional financial markets.

“It is a fairly new asset class. Some advisers might not know well about how it can be traded. We have to guide them on how they can use our platform to trade cryptocurrency and how they can earn rebates that we offer,” says Chuah. 

Before FA Advisory,  Sinegy had about 20 corporate accounts set up. Half of them are what Chuah calls “legacy accounts”, which are accounts registered with the exchange since the early days.

Chuah says, however, that they are not institutional clients, as their trading activities and volumes were scant and small. “These accounts were mainly set up by those who wish to trade cryptocurrencies at a larger amount, just in case, by using the funds in their companies. The trading limit of an individual investor is RM300,000 a month. For corporate accounts, it goes up to RM12 million,” says Chuah. 

At the time of writing, Sinegy was engaged by two financial institutions to set up corporate accounts. One of them is seeking approval from the regulator, the Securities Commission Malaysia (SC).

Interestingly, a proprietary trading desk of a brokerage firm is setting up a corporate account with Sinegy. The firm is seeking advice from the SC, says Chuah. 

“There are no regulations as yet about proprietary trading desk that trades cryptocurrencies. We wrote a letter to the SC too. And we were made to ensure that we do not give the proprietary trading team (registered with Sinegy) special privileges.”

“For instance, we should charge them the same fee as any other individual account holders in the market. On orders execution, we have to treat all parties equally by not letting proprietary traders cut the queue.”

A start-up, whose name Chuah declines to disclose, is in the midst of setting up a corporate account with Sinegy to offer its users the option of depositing their money in cryptocurrency.

“Let’s say clients of the start-up want a refund for the service that is cancelled. Instead of returning its clients’ money, in ringgit, the start-up wants to provide them with the option to put their money with the company in the form of cryptocurrency. 

“Businesses are getting more creative with the use of cryptocurrency nowadays,” he says. 

For now, Sinegy is offering its clients two cryptocurrencies: Bitcoin and Ether. It is looking to add Ripple to its list. 

There are five cryptocurrencies approved by SC that can be offered to the public, including Litecoin and, most recently, Bitcoin Cash.

According to its press statement, Luno, another licensed digital asset exchange, has started offering Bitcoin Cash on May 5. It is the top 15 most traded cryptocurrency globally.