Canadian institutional investors showed a significant surge in crypto asset investments in 2023, with 39% of respondents revealing direct or indirect involvement in these assets. This marks a noticeable increase from the 31% reported in 2021. Moreover, one-third of these investors allocated 10% or more of their portfolios to crypto assets, indicating a growing confidence in the sector.
The findings emerged from a comprehensive survey conducted by KPMG in Canada and the Canadian Association of Alternative Assets and Strategies (CAASA). The study targeted both financial services organizations and institutional investors operating within Canada. The results portrayed a notable uptick in crypto asset engagement across the board.
Financial services organizations exhibited a substantial expansion in crypto-related offerings. Half of the respondents stated that their organizations actively provided at least one type of digital asset service to clients, a marked increase from 41% in 2021. The most common services included trading, custody, clearing, and settlement services, and quantitative trading.
Growing Appetite For Crypto Among Institutional Investors
Institutional investors, on the other hand, showcased a growing appetite for digital assets, with 39% reporting exposure to these assets in 2023, up from 31% in the previous year. Notably, 75% of these investors held crypto assets directly, while others accessed the market through various regulated products such as exchange-traded funds (ETFs) and derivatives.
Kunal Bhasin, partner and co-leader of KPMG in Canada’s Digital Assets practice, highlighted the industry’s resilience despite recent turbulence. He attributed the crypto rally of 2023 to factors such as rising U.S. debt and increasing inflation, positioning crypto assets as alternative investment options and stores of value for institutional investors.
Kareem Sadek, Emerging Technology Risk leader at KPMG, emphasized Canada’s role in fostering a conducive regulatory environment for digital asset innovation. He noted that regulatory approvals for Bitcoin and Ethereum ETFs, alongside other supportive measures, have bolstered investor confidence in the sector.
The survey also revealed a growing trend of diversification within digital asset investments. Institutional investors employed a variety of strategies to gain exposure, including direct ownership, investment in regulated products, and participation in venture capital or hedge funds specializing in digital assets.
Experts in the industry predict that there will be more institutional adoption of cryptoassets by companies within Canada. They recommend education as priority number one; strategic planning secondly and then finally due diligence when entering this new market.
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