Et tu, DBS ?
[1] Congrats to DBS for dipping its toe. Before we get all excited, it is only open to rich sophisticated investors or institutions (ie 98% of us would not qualify). However, there are already tonnes of other exchanges around the world that provide far too many choices in my opinion (now even Defi). The only set-back with these exchanges is that they are likely to be in a jurisdiction that is unfriendly to potential claimants or without much recourse. If you looking for an exchange read the terms and conditions very carefully and make sure if they are in a jurisdiction where consumers are protected. In most cases, one can only find a disclaimer.
[2] I am a fan of digital assets but in reality and this is disappointing as DBS's foray does nothing to solve the real issues of why digital assets are 'speculative' to many. The move from centralized to decentralized meant the control is now open to stakeholders cum participants, for example, the "validator" for ETH or "miners" for BTC or even the issuing themselves like in XRP (selected validators). In short, DBS merely jumped onto the band-wagon.
[3]As digital assets are governed by the code, the power to amend/change the code is in the hands of many but also in a few yielding great influence. They can vote to fork (ie modify the codes). You can say this is democracy at work or simply out of control looking on from the other side. There is a real chance for "rogue" participants to hijack the chain by forking creating two or more digital assets (see bitcoin cash).
[4] These can cause uncertainties and hence affect pricing or more. DBS could be a "super" validator? This means lending its name as a trusted entity as validators as opposed to thousands of anonymous validators out there (hence only accountable to the platform - by penalty of burning). In a way, validators are 'mini' banks as they process the transactions unlike exchanges providing a two-sided market. Validators earn a fee for processing while exchanges earn a fee for matching a trade. Clearly, this option should be considered and the only "downside" in being a validator is to have skin in the game, ie DBS would need to buy or borrow a few digital assets to kick start this.
[5] DBS is entering a race to the bottom market where even next-door Malaysia under its central bank required at least 50 "exchanges" to report (AML/CTF) to it but so far only 3 are fully licensed by the Securities Commission. Of course, none of them are licensed banks. (https://www.sc.com.my/regulation/guidelines/recognizedmarkets/list-of-registered-digital-asset-exchanges).
[6] To the sophisticated investors, the more exchanges meant more opportunities and able to arbitrage. Perhaps far more important is a way to legitimize their holdings now through a licensed bank that obviously offers traditional banking services as a bonus. For example, one has been hoarding BTC for years and now is worth a fortune, how can one legitimately capture this fortune in a way minimizing all taxes and so on? DBS has always had a keen eye to expand its business. This is nothing new as years ago, DBS had an interest in DBSVickers as its stockbroker for its clients before moving them in-house by integrating vide their platform. To me, the writing is already on the wall. Years ago, Vickers and later DBS used to charge me min SGD 25 for a share transaction, so I moved to IB for USD 1.5.
[7] Initially to create a market and to provide liquidity, I am sure DBS would also participate in its own exchange on behalf of itself or its sophisticated clients against other accredited clients/non-clients. This may create a conflict of interest (such as fronting particularly for big sizes). There is not much assistance even though the Singapore Exchange (SGX) may have a token 10% stake in DBS's exchange.
[8] Another likely issue is storing/custody of the digital assets, which will be the same as others albeit at a higher cost. DBS argues that it can leverage its experience in providing world-class custody services for conventional assets. With respect, there is a reason why digital assets get stolen and it has nothing to do with having more experience in handling physical assets like paper. Of course, I may be wrong and most of DBS' clients would just buy and store which in this case would greatly benefit from its conventional assets experience. However, in most cases, DBS would rely on a third party's hardware just like other exchanges.
[9] Lastly, independent verifications of DBS's codes for its platform? Unlike other exchanges supporting open-source as a way to show robustness (or lack of it), DBS had not been open or transparent to this so far. Maybe it is just an over-sight or maybe DBS is a bank after all.