Apr 6, 2022
More investment firms dipping their toes in crypto assets: Survey
Canada isn't competitive with crypto but we have the opportunity to change: Ether Capital CEO
A new study finds there’s a growing acceptance of cryptocurrency-related investments among Canadian institutional investors, but firms are showing restraint in how much they’re allocating towards those assets.
Fifty-seven per cent of institutional investor respondents said they gained exposure to crypto-related assets between 2020 and 2021, according to the survey. The poll was conducted by KPMG and the Canadian Association of Alternative Strategies and Assets and collected responses from 75 firms.
It also found the majority of firms are being very conservative with their exposure to crypto – 71 per cent said they allocated less than two per cent of their portfolio to the asset class.
“While this is a newer and potentially promising space for institutional investors, they’re clearly taking a prudent approach,” said Chris Farkas, a partner at KPMG in Canada, in a release on Wednesday.
As for how these firms were gaining exposure, most gravitated to regulated products such as exchange-traded funds (ETFs), the data showed.
Out of the 32 per cent of institutional investors that reported either direct or indirect ownership of crypto assets, half said they owned crypto-related ETFs, while 36 per cent owned crypto-related stocks and 29 per cent owned digital coins directly.
“Institutional investors are increasingly adding exposure to crypto assets to further diversify their portfolios given the reduced ability of government bonds to act as portfolio shock absorbers,” said Farkas.
Similarly, financial services firms have also bolstered their crypto offerings.
Nearly have (42 per cent) of financial services firms now offer wealth management or financial advice for cryptocurrency assets, 33 per cent offer clearing and settlement services, and 22 per cent offer investment vehicles such as ETFs.
Crypto assets have arguably been making their way into the mainstream investment world in recent years as more firms launch funds tied to the crypto sector.
Toronto-based Purpose Investments launched the world’s first Bitcoin ETF in February 2021, and other firms such as CI Financial, Fidelity Investments and Evolve have rolled out a slate of crypto-themed ETFs and mutual funds over the past two years.
Investment platforms such as Wealthsimple have also entered the crypto world, bringing digital coin trading to its base of younger retail investors.
“While institutional investors have told us they are interested in the crypto space because they see it as an innovative technology play with high potential upside, financial services companies are also interested in crypto assets, but they’re a bit more cautious because of the lack of regulatory clarity in Canada,” said Kareem Sadek, a partner and Crypto Assets and Blockchain leader at KPMG in Canada, said in the same release.
“Even with that regulatory uncertainty, nearly four in 10 financial services companies we’ve heard from are offering crypto asset services, so we think this will be a pivotal year for crypto adoption among financial institutions.”