Singapore-based Tiger Brokers has already built a reputation among retail investors in the stock market, but its foray into cryptocurrency in Hong Kong will prove to be a new chapter for the exchange.
Many of you may already be familiar with Tiger Brokers. The Monetary Authority of Singapore (MAS)-approved trading platform offers a wide range of investable products, including stocks, futures, ETFs, options, warrants, and more. But there is one asset class that the platform lacks, namely cryptocurrency. Until now (if you’re in Hong Kong).
Professional investors can now trade 18 cryptocurrencies as well as stocks, futures, U.S. Treasuries and Hong Kong's newly launched Bitcoin ETF. Such investors must have a portfolio worth more than HK$800 million and a corporate entity with assets exceeding HK$4000 million.
Tiger Brokers operates under the supervision of local regulators and provides services in partnership with HashKey Exchange. The transaction fee is only 0.2%, which is very competitive. Its digital asset transactions provide instant settlement and 24/7 service.
The Nasdaq-listed exchange plans to expand these services to retail investors after obtaining regulatory approval. It may also launch additional features such as virtual asset spot withdrawal and deposit services.
To further understand Tiger Brokers’ acceptance of cryptocurrencies, Blockhead interviewed Kelvin Liu, the company’s VP of Engineering and Head of Cryptocurrency. With over 15 years of experience as an architect and manager in the online advertising and fintech industries, Mr. Liu currently leads over 300 talented engineers focused on building Tiger Brokers’ trading systems, data and growth platforms, and user products.
Seize institutional clients
Whether you’re a trader or someone who’s indifferent to investing, you’ve probably seen one of Tiger Brokers’ many advertisements around Singapore. From bus stops to social media, Tiger Brokers has been actively trying to attract retail users and make trading as seamless as possible.
However, as institutional investors begin to get involved in the cryptocurrency space, Tiger Brokers is also leaning towards institutional clients. Liu told Blockhead: "While we may have had a large retail investor client base 10 years ago, we are always looking to expand and customize our services to meet the needs of investors, regardless of their background and experience."
But Tiger Brokers is not neglecting its retail client base. In fact, the exchange plans to expand its service offerings to users in Hong Kong.
Mr Liu said: "Given the growing interest among retail investors in both cryptocurrencies and traditional asset products, we ultimately plan to open virtual asset trading to them in the future, subject to regulatory approval. Once approved, we aim to provide retail investors with the same diverse trading options currently available to our professional clients."
Taming the tiger, taming crypto?
You don’t need us to tell you how risky cryptocurrencies are. Just ask SBF. For Tiger Brokers, investing in digital assets is a cautious process.
“Investing in cryptocurrencies has its own unique risks and rewards,” Liu explained. “Recent regulatory advancements, such as the Hong Kong Securities and Futures Commission’s (SFC) approval of cryptocurrency ETFs, are key steps in integrating virtual assets into traditional financial markets. However, due to the volatility of cryptocurrencies, they should be approached with caution and with a sensible strategy.”
The appeal of cryptocurrencies lies primarily in their potential returns, but Tiger Brokers still wants to ensure its customers are playing it safe.
"While cryptocurrencies may offer high returns and serve as an effective diversification tool, investors must conduct a thorough market assessment, consider their investment preferences, and develop a sound risk management strategy before investing," Liu said.
To achieve this goal, the exchange provides a “secure and transparent trading environment.”
Mr Liu added: "We strongly recommend investors to make informed decisions based on comprehensive research and analysis rather than blindly following the trend."
Meeting expectations
Institutional investors already have plenty of options for trading digital assets. To stand out, Tiger Brokers is trying to address some of the grievances these clients face.
“Institutional investors often face the inconvenience of managing multiple accounts across different platforms to access various digital assets and markets,” Liu explained.
“Our platform consolidates these needs into a single integrated solution, allowing investors to trade a variety of assets, including virtual assets such as Bitcoin and Ethereum as well as stocks, options, futures, funds and ETFs in one place without having to open and manage multiple accounts. This not only simplifies the trading process, but also improves operational efficiency and reduces administrative burdens.”
The exchange will list 18 cryptocurrencies when it launches in Hong Kong, but Liu said the exchange will continue to "monitor the cryptocurrency market for promising new currencies that meet our standards, and plans to expand our cryptocurrency product range in the future, subject to regulatory approval and market conditions."
Hong Kong is an ideal place for cryptocurrencies
Hong Kong has become a major hub for virtual asset trading. Although its ETFs have performed disappointingly in terms of inflows, there is no doubt that Hong Kong is the leading city in the cryptocurrency space in Asia.
"We have noticed a surge in demand for virtual assets among global investors, especially in Hong Kong," said Mr. Liu. "Our entry into the cryptocurrency market is a direct response to this trend. This enables us to provide eligible customers with the ability to trade cryptocurrencies as well as other global products on a single platform."
Mr. Liu also said that the timing of the Hong Kong Securities and Futures Commission’s (SFC) approval of a cryptocurrency ETF was a “perfect time” for Tiger Brokers to launch cryptocurrency products.
Compared to the United States, the product features offered in Hong Kong may be more extensive.
“Recently, there have been reports that Hong Kong is considering allowing direct investment in Ethereum exchange-traded funds (ETFs) for staking,” Liu added. “This could unlock a passive income source that has been excluded from the plans of potential U.S. issuers. This regulatory development suggests a progressive approach to fostering the growth of the digital asset ecosystem and could encourage greater institutional participation.”
Safe Methods
Cooperation with Hong Kong regulators is also very important for the exchange. “Our strong compliance framework includes comprehensive KYC and AML procedures, and we follow the Hong Kong Securities and Futures Commission’s guidelines for cryptocurrency products,” he said. “We also have strict security measures in place to protect customers’ assets and personal information, using advanced encryption technology and regularly updating our systems and protocols.”
"As a financial services provider, we value the role of regulators in creating a safe and transparent trading environment. Regulation should strike a balance between investor protection and the promotion of innovation," he added.
Therefore, it is important for the industry to embrace these regulatory changes. "The industry must adapt to increasingly stringent regulatory expectations to create a stable and reputable environment," Liu said. "As an innovative financial tool, we believe that regulation will find the best balance between market development and investor protection. By establishing a reasonable and effective regulatory framework, we can ensure a convenient and secure experience in storing and using digital assets while safeguarding public interests and financial stability."
Roaring Environment
Looking ahead, Tiger Brokers believes that the market will continue to mature with the emergence of more complex financial products such as crypto structured products and ETFs.
Liu noted that the SEC’s approval of a Bitcoin ETF “clearly signals where the digital asset space is headed.”
The firm also believes that institutional adoption of digital assets “will definitely increase” as regulators in Asia, such as Japan, Hong Kong, and Singapore, continue to develop guidelines and regulations.
Mr. Liu said: "Tiger Brokers is committed to playing an important role in this evolving environment. By continually exploring opportunities to expand and improve our products, we aim to meet the evolving needs of our clients. This includes supporting the growth of the digital asset sector and enabling investors to effectively capitalize on this emerging market."
Stripes unchanged
For institutional investors formulating investment strategies in the digital asset space, Liu advises them not to stray too far from their established cautious approach.
"It is critical to consider the regulatory environment in the jurisdictions where institutional investors plan to invest," Liu said. Indeed, the volatility of cryptocurrencies calls for even greater caution. "A strong risk management strategy should also be in place, given the relatively high volatility of cryptocurrencies compared to many other traditional asset classes."
“Institutional investors should always evaluate the infrastructure they plan to interact with, whether it is a custody solution, trading platform or exchange,” he added. “In summary, thorough market research and due diligence practices should guide all investment strategies, especially when it comes to new asset classes.”
There are benefits to institutional investors following old habits, too. “When it comes to portfolio management, the age-old diversification strategy applies even to digital assets,” Liu said. “Institutional investors should seek to diversify their holdings across various types of digital assets, from cryptocurrencies to tokens and stablecoins.”
Fighting for legitimacy
Cryptocurrency has a bad reputation. Just ask SBF. For Tiger Brokers, overcoming this stigma will require the concerted efforts of the entire industry.
“Continued institutional investment is likely to increase the credibility and legitimize this asset class, while also influencing price volatility over time,” Liu explained. “With the addition and increasing popularity of institutional-grade infrastructure and practices, the entire digital asset market will also mature with increased institutional participation.”
Tiger Brokers is also doing its part by assisting with risk assessments. When asked what risk management tools and strategies the company recommends to reduce volatility in cryptocurrency portfolios, Liu said the company “constantly evaluates and monitors the risk level of the portfolio and uses tools that provide real-time analysis and risk indicators to stay informed of market conditions and potential risks.”
“At Tiger Brokers, we want to develop tools and insights to help investors better navigate extreme market events and implement appropriate risk mitigation measures.”