Interest in cryptoassets increasing among institutions: survey

Canadian institutional investors and financial services organizations are increasingly returning to the cryptoasset products and services market, according to a survey from KPMG in Canada and the Canadian Association of Alternative Assets and Strategies (CAASA).

Their bi-annual survey on the topic showed 22% more financial services organizations offered cryptoasset products and services to clients last year than in 2021, and 26% more institutional investors included cryptoassets in their portfolio last year than in 2021.

Half of financial services respondents said they offered cryptoasset services in 2023, up from 41% in 2021. Nearly four in 10 (39%) institutional investors said they direct or indirect exposure to crypto, up from 31% in 2021.

“The last time we did this survey in 2021, it was a strong year for cryptoassets. The following year was a turbulent year, marked by fraud and collapses of major cryptoasset trading firms, but those events had a cleansing effect on the industry,” Kunal Bhasin, partner and co-leader of KPMG in Canada’s Digital Assets practice, said in a release.

“Rising U.S. debt combined with increasing inflation likely provided a catalyst for the crypto rally of 2023, and it appears investors are looking for alternative asset classes that act as a debasement hedge and a reliable store of value,” he said.

According to the survey, each financial services organization offered an average of two to three service offerings, up from an average of one to two services in 2021. Client demand was a significant driver, with eight in 10 financial services respondents citing it as a major factor in their expansion of cryptoasset services.

The three most common types of services included cryptoasset trading; custody, clearing and settlement services; and quantitative trading.

Among institutional investors, a third said they’ve allocated 10% or more of their portfolios to cryptoassets — up from a fifth two years ago.

More than two thirds (67%) of investors cited the maturing market and custody infrastructure as key reasons behind their first investments in cryptoassets, up from 14% in 2021. More than half (58%) also cited strong market performance, up from 21% in 2021.

Kareem Sadek, emerging technology risk leader and co-leader of KPMG’s digital assets practice, said Canada’s role in creating a regulatory environment that supports innovation in cryptoassets, along with rising prices for cryptoassets are likely reasons why institutional investors have been increasingly attracted to the crypto space.

The survey collected responses from 31 institutional investors and 34 financial services organizations between June 9 and Dec. 1, 2023.