PARTNER CONTENT
A conversation with Neil Thomas, Chief Commercial Officer at AsiaNext in Singapore, on how regulations, banking, and the right blend of strategies is needed for the next growth chapter of institutional capital in crypto.
Bitcoin hit the $100,000 mark on 5 December 2024, reaching a milestone that many had been eagerly anticipating. With Donald Trump having publicly undergone the journey from crypto sceptic to champion, the November election was a decided injection of momentum for the asset class.
As it happens, the opening of institutional floodgates into crypto is very clearly now a question of when, not if. And that point appears to be drawing nearer. Neil Thomas of AsiaNext says: “The convergence of traditional finance and digital assets is no longer a distant prospect – it’s happening now. At the heart of this evolution is the US$100bn-per-day crypto derivatives market, where efficiency, capital allocation, and liquidity are paramount.”
Crypto spot trading has consistently been dwarfed by crypto derivatives trading. The relative importance of each market may evolve as the crypto ecosystem matures and new products and services emerge.
CCData’s November 2024 Exchange Review shows that “crypto derivatives volumes increased by 89.4% in November, recording an all-time high volume of $6.99tn……as traders looked to capitalise on the upside volatility on the bullish price action of major digital assets.”
Perpetual futures continue to dominate crypto derivatives markets (Jan-May 2024). Hedge funds are net short on BTC and ETH futures, according to Kaiko Research. “Funding rates and open interest changes in perps can often be a precursor to moves in spot markets and higher leverage here can signpost potential pullbacks ahead of time.”
Matching sophistication
Crypto will never truly mirror traditional finance (TradFi) – indeed, its very purpose is to be a decentralised alternative to capital markets.
That said, Thomas highlights two key developments that need to take place for wider pools of capital – particularly institutional money – to flow into digital assets.
The first is regulatory sophistication. “Globally, regulation is one of the biggest challenges for those looking to break into the crypto space. The US, for instance, remains cloudy – though the election has certainly brought hopes of ushering in a clear and concise regulatory framework on a global scale.
“With limited systems in place, many are having to regulate themselves, making sure they have the types of governance, risk management, and compliance mechanisms in place to invite a flow of institutional money.”
A Hedgeweek report from August 2024 found that regulated custody was far and away the biggest priority in the institutional space when it comes to further crypto investments – cited by 56% of hedge fund respondents. The second biggest priority was trading from cold custody platforms, with security being key here.
“Crypto can’t reach its full potential and achieve mass adoption if it doesn’t receive the type of backing from regulators as other financial industries.”
The second barrier to institutional growth for crypto, Thomas says, is banking access:
“Firms and industries still have bills and salaries to pay, which they can’t do in crypto as of now. Some companies are starting to pay employees in selected cryptocurrencies or stablecoins, but fundamentally, crypto still isn’t applicable to pay the mortgage, or for going to the grocery store.
“Banking is a crucial next step for the industry to spread a wider net, and the regulatory safety buffer that will accompany this shift will secure a more robust flow of institutional money.”
A central challenge here is the fact that crypto is a 24/7 market, and banking operations are not geared for monitoring and management around the clock. Still, there are many positive developments underway, too. Thomas notes that crypto has now moved out of its ‘hype phase’, and the naysayers are drifting away.
Most banks and financial institutions now have a digital asset strategy, and this wave will only gather momentum – particularly as ‘FOMO’ sets in.
Meeting of worlds
Safety and sophistication are key to draw in institutional capital, and many firms operate as a conduit between the worlds of TradFi and digital assets – laying out a clear path to investment with all boxes ticked. AsiaNext is among these businesses, focused on giving institutional investors the benefits of capital efficiency, risk mitigation, and regulatory assurance, among others.
Established by SIX Swiss Exchange and SBI Digital Asset Holdings, the business was created at the intersection of legacy and digital systems, and uses this dual identity as a distinct advantage. Thomas says: “We’re bilingual in that sense, with a clear view of both worlds.
“We offer tech connectivity that appeals to traditional investors as well as crypto natives. Our members have a range of options, including the ability to post US dollars or securities as well as stablecoins as collateral. We have a really good view of how the two markets are converging, and we’re here to facilitate that convergence to ensure the crypto space can sustain its astronomical growth.”
The exchange also benefits from the regulatory rigour of the Monetary Authority of Singapore (MAS), which creates a favourable environment for digital assets trading. “Singapore offers a strong regulatory jurisdiction, setting a high bar for crypto licensing and governance, with progressive initiatives like the Payment Services Act and Project Guardian.”
Currently, AsiaNext is awaiting its MAS licence for their crypto spot exchange, which will offer trading and custody of crypto tokens. This will supplement its existing derivatives exchange for calendar futures, perpetual futures, and options across Bitcoin and Ether, with intentions to expand into a wider range of coins.
With the right regulatory environment and a strong foot in both markets, AsiaNext is well positioned to capitalise on what is a strengthening wave of institutional capital into crypto.
Neil Thomas, Chief Commercial Officer – Neil leads business and product strategy and is responsible for bringing on board partners and members to AsiaNext. With over 25 years’ experience in the industry covering leadership and commercial roles, Neil was previously the Head of Asia Pacific region for the Swiss exchange group SIX – since 2018, working closely with clients covering exchanges, data, securities services, and innovation.
Prior to arriving in Asia, Neil spent a decade heading global relationships with strategic clients of SIX, primarily based out of London. Neil joined SIX from Thomson Reuters where his role focused on the investment banking and management sectors for 10 years. Neil is a certified member of FISD.
