The ability to trade across both FX and cryptocurrency has prompted institutional traders in Singapore to take a closer look at the latter, although obstacles remain to be overcome if it is to become a core element of portfolios.

Singapore remains very clear in regulatory terms that FX and crypto are distinct markets – the former is supervised under long‑standing capital markets and banking rules, while digital assets sit under the Payment Services Act and related MAS frameworks for digital payment tokens.

Singapore Sees FX Crypto Convergence

At the trading front end, the distinction is blurring. Many multi‑asset brokers and trading platforms now offer FX, CFDs and crypto on the same interface, often using similar margin, execution and risk systems. For active traders, that means increasingly thinking in terms of 24/7 macro and volatility exposure rather than in strict FX versus crypto silos.

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“Institutionally, Singapore has deliberately built itself as both a leading global FX hub and an institutional grade digital asset centre, so the infrastructure stacks are converging,” explains Kate Leaman, chief market analyst at AvaTrade.

Separate Rules, Shared Standards

While the regulatory regimes remain separate, MAS has been deliberate in allowing institutional participation across both, rather than letting crypto markets develop in isolation.

As a result, institutional traders increasingly apply the same governance, compliance and risk management standards to crypto trading that they use in FX.

“For institutional traders, this convergence should translate into greater confidence when accessing crypto markets through regulated entities, with clearer expectations around custody, capital treatment and operational risk - even where regulatory objectives differ,” says Julien Le Noble, chief executive officer GTN Asia.

Tokenisation Drives Institutional Learning

In many ways, trading digital assets and the opportunities they present mirror those in FX with the same core attraction: the ability to extract alpha.

Where engagement has notably increased is in the recognition that tokenised assets are likely to form a part of the future structure of capital markets.

As a result, building knowledge around trading, safeguarding and understanding the underlying technology on which these assets increasingly operate has become a serious driver of institutional involvement suggests Nick Strain, director LMAX Digital.

Infrastructure and API Connectivity Lower Barriers

The convergence of crypto and FX markets in Singapore has significantly reduced costs and increased market access for institutional traders and brokers because API connectivity in digital assets has largely become commoditised.

“Any platform can now be connected to any exchange and any digital asset liquidity provider using the same protocols already implemented across existing FX trading infrastructures,” notes Tom Higgins, founder & CEO Gold-i.

“This removes the need for bespoke integrations and lowers the technical and operational barriers to entry.”

Strategic Allocations Remain Limited

Cryptocurrency is still perceived as a small allocation in strategic terms. For example, although there has been a good deal of engagement, the two main sovereign wealth funds in Singapore have not allocated to direct crypto asset holdings.

Increased regulatory clarity has been welcomed and has led to the emergence of these strategic allocations, but more needs to be issued - particularly in other regions - to further confidence in investing according to Mark Garabedian, director digital assets and tokenization at Wellington Management Singapore.

“Infrastructure is the key challenge and that starts with custody and the need to be able to partner with a trusted, reputable institution offering high grade custody that obfuscates technical hurdles,” he says.

“There are also ancillary adjustments to operations, risk, compliance and oversight that need to be built. While the long term benefits of holding assets on chain should bring ongoing costs and risks down, the short term adjustment to on chain investing will require proper tooling.”

Structural challenges still exist for many asset managers. Investor mandates often do not yet explore exposure to newer asset classes such as digital assets, limiting their ability to invest directly in crypto markets.

However, those that have control over their own assets - such as high net worth individuals or family offices - are far more likely to invest in crypto markets, suggests Strain. “Given there are more than 2000 registered family offices in Singapore and they manage assets in excess of $67 billion, there is a significant potential investor base that is either already invested in or is considering investing in digital assets as a core part of their holdings,” he says.

Regulated Products and Settlement Efficiency in Focus

In addition, the advent of crypto ETFs and the creation of digital assets futures on regulated exchanges have allowed investors in Singapore to gain exposure in a format they already understand.

Legacy technology within domestic institutions will need to be connected to digital asset markets which operate using technology that differs from their existing systems and the regulatory environment also presents a challenge, as the regulator does not yet have full digital asset regulation in place.

However, Higgins notes that this is coming and will drive increased market uptake amongst institutional investors and firms in Singapore.

As for institutional traders and brokers in terms of market access and costs, Strain suggests that for the larger players, legacy systems remain relatively efficient when it comes to trading. “The greater opportunity lies is in the settlement layer,” he says. “Here, stablecoins are the product driving step-change improvements in efficiency and cost.”

Cost reductions at this scale potentially change the fundamental nature of the FX business from an institutional model that relies on aggregating transactions into a marketable parcel and then transacting into a model of smaller trade sizes, dramatically lower transaction costs and corresponding tighter spreads.

Regulation as a Competitive Differentiator

Leaman reckons the integration of FX and crypto in Singapore reinforces its status as a pricediscovery and risktransfer hub. Average daily FX volumes have continued to climb, cementing Singapore as the world’s thirdlargest FX centre, while the number of licensed digital asset providers has grown under a clearer MAS rulebook.

“That combination is exactly what institutional traders want,” she says. “Deep liquidity, strong regulation and the ability to trade legacy and novel asset classes through a unified, institutionalgrade infrastructure.”

A competitive advantage will accrue to brokers and venues that can offer capital-efficient, compliant and scalable multi-asset access, adds Le Noble. In this environment, regulation will act less as a constraint and more as a differentiator.