Report: Singapore may become the next "encryption hot money gathering place"

Source: Sygnum survey

Compiled by Wenser, Odaily Planet Daily

Editor’s Note: As the “encryption center” in recent years, perhaps due to the painful experience of Singaporean investment institutions in the previous FTX collapse incident, the Singaporean government has always maintained a “friendly and cautious” attitude towards encryption regulation.

Nevertheless, the penetration rate of Cryptocurrency in Singapore is still gradually increasing. More and more institutions and individual investors are turning their attention to Cryptocurrency beyond the TradFi field. After Trump won the US presidential election, a series of potential measures such as BTC strategic reserves have also laid a good foundation for the development of the Cryptocurrency market. In the current and near future, when economic globalization and the mainstreaming of Cryptocurrency are accelerating integration, Singapore may become the ‘encryption hot money gathering place’ in 2025.

The following is a financial survey recently released by the well-known asset management group Sygnum, compiled and organized by Odaily Star Daily, with some content deleted and modified.

Singaporean investors’ current situation: 57% of institutional investors plan to increase long-term Holdings

Recently, the global digital asset bank group Sygnum released the results of its annual Future of Finance survey. The survey measures and analyzes core interests, market sentiment, and trading behavior of institutions and professional investors active in the cryptocurrency market. The survey included over 400 respondents with an average of more than 10 years of investment experience, including Sygnum’s institutional clients, investors, as well as a diverse range of investment professionals from banks, hedging funds, multi-family and single-family offices, DLT foundations, funds, and asset managers. A total of 121 local respondents from Singapore participated in the survey.

Sygnum Asia Pacific Co-founder and CEO Gerald Goh said, ‘For the cryptocurrency and the broader digital asset ecosystem, 2024 is full of positive new developments and numerous important moments. One of the most significant may be the launch of the BTCSpot ETF, which is expected to accelerate institutional investors’ adoption of digital assets after approval by the US Securities and Exchange Commission.’

The survey shows that investors in Singapore have a high enthusiasm for encryption assets: 57% of investors plan to increase long-term allocation of encryption assets, higher than the survey average of 47%. It is worth noting that 30% of investors regard the unclear regulatory situation as the main barrier to entry, while 45% of respondents mentioned that security and custody issues are the main considerations, indicating that the development of the encryption ecosystem has benefited from regulatory progress. Therefore, this report aims to highlight the new trends and emotional changes of institutional investors, which can reflect the current market situation and provide reference for the future development of the blockchain industry.

3 main reasons to invest in digital assets

Regarding investment strategies, surveys show that the majority of institutional and professional investors in Singapore are increasing their investment in Crypto Assets, with 57% of respondents planning to increase their encryption asset allocation. This is mainly driven by long-term confidence in the major trends and diversification potential of Crypto Assets, even though the crypto market is in a highly volatile state.

The primary reason for investing in Cryptocurrency is to be exposed to the Cryptocurrency trend (56%), followed by portfolio diversification (41%) and return on investment (39%);

Even in the current large market Fluctuation, 57% of respondents still plan to increase their Crypto Asset allocation; 65% of people say they have a greater risk tolerance for such assets;

27% of respondents plan to maintain their existing Holdings, only 2.5% plan to reduce their respective Holdings;

37% of respondents cited the availability of institutional products as a reason to increase allocation.

In addition, another survey report shows that 63% of respondents have a high risk preference for encryption assets, which indicates that most respondents interested in encryption assets are usually more confident in their fluctuation. At the same time, 28% of respondents showed a more cautious interest and aimed to invest from a neutral standpoint. Among the 17% of respondents who currently do not invest in cryptocurrency, most tend to have a moderate to low risk tolerance, often mentioning issues such as lack of trust and asset fluctuation in the on-chain world. More than a quarter of people are willing to allocate encryption assets in the future, while half of them have not yet decided to invest in it, and 20% of them have no investment plans at all.

Strong demand for asset category information

Singapore investors hope to obtain better information quality and a deeper understanding of digital assets.

Compared to the global average of 76%, 90% of Singapore investors said, “Access to quality information and better understanding of this asset class will encourage them to increase their investment or start investing in Crypto Assets.”

Access Barriers for Institutions

It is worth noting that the report also shows that although regulatory clarity has improved, security and custody issues are now the biggest obstacles for Singapore institutions adopting cryptocurrencies, with 45% of respondents citing this as the main barrier; lack of sufficient information and understanding account for 41%, and asset volatility ranks third, also at 41%. The significant improvement in regulatory clarity brought by the BTCSpot ETF and EthereumSpot ETF in the United States has injected considerable confidence for more institutions to join the investment ranks, but market education remains crucial.

75% of respondents believe that regulatory clarity has improved;

73% of respondents believe that Cryptocurrency ETFs have increased their confidence in this asset class;

90% of respondents said that more comprehensive and improved information would encourage them to increase investment.

Crypto Assets Investment Preferences

L1 public chains and Web3 infrastructure are currently the most attractive areas for Crypto Assets investment, mainly driven by trends such as DePIN (decentralized physical machine infrastructure network) and AI.

Singaporean investors are most interested in the top 3 areas, namely L1 (71%), Web3 infrastructure (56%), and L2 (41%).

The areas ranked high in terms of assets with potential for tokenization, according to respondents, are mutual funds (47%), corporate bonds (47%), equity (40%), and hedging funds (39%).

In terms of investment preferences, the preferred investment strategy is active management investment that generates excess returns (41%), followed by passive income investment (37%) and industry investment exposure in the target rise area (36%).

In addition, 91% of respondents said they primarily invest in blockchain protocol tokens (such as BTC and Ethereum). This reflects people’s overwhelming preference for mature assets, which are considered to have less volatility and are supported by traditional institutions. This interest also extends to other L1 public chain competitors, such as Solana and BNB Chain, decentralized smart contract platforms and ecosystem infrastructure.

Half of the respondents hold stablecoin, using its non-volatility as a risk hedging tool and as the ‘main ticket’ to enter the cryptocurrency market. Since last year, there has been a continuous rise in interest in stablecoin, possibly due to the increasingly mature regulatory framework for existing stablecoins, and the underperformance of many DApp-related tokens compared to mainstream tokens such as BTC and Solana.

It is worth noting that the composition of portfolios and investment strategies are diversified: nearly 40% of respondents invest in Decentralization applications (DApp) Tokens, 39% of respondents invest in Non-fungible Tokens, and only 13% of respondents invest in L1 protocol Tokens.

Finally, the study suggests that if market conditions improve, investors who plan to maintain their current allocations may increase them more quickly, with 46% of investors planning to increase allocations in the next six months, and over 60% of investors holding a positive view on the crypto market investment in 2025.