In a recent survey conducted by accounting firm KPMG, it was revealed that institutional investors based in Canada significantly increased their exposure to cryptocurrency assets in 2023 compared to previous years. The survey, which received responses from 65 participants, including institutional investors and financial services organizations, sheds light on the growing trend of crypto adoption among major financial players.
In today’s news, 39% of Canada’s institutional investors have exposure to crypto, marking a significant increase in adoption. According to the survey, nearly 40% of institutional investors reported having either direct or indirect exposure to crypto assets in 2023. This marks a noticeable increase from 31% reported in KPMG’s 2021 study, indicating a growing interest in cryptocurrencies within Canada’s investment landscape.
Allocation of Portfolios
One of the notable findings from the survey is that one-third of institutional investors have allocated 10% or more of their portfolios to crypto assets. This is a significant rise from two years ago when only a fifth of investors had such allocations, highlighting a shift towards considering cryptocurrencies as a viable investment option.
Kunal Bhasin, a partner and leader at KPMG Canada’s Digital Assets practice, suggested that institutional firms are turning to alternative asset classes like cryptocurrencies as a hedge against currency debasement and as a reliable store of value amid concerns about increasing inflation and rising debt in the United States.
The survey also pointed out that a majority of investors cited the maturation of the crypto market and improved custody infrastructure as key factors driving their investment decisions. Additionally, the increased demand for crypto asset services from clients was highlighted as a significant factor leading financial firms to expand their offerings in this space. Overall, the data suggests that 39% of Canada’s institutional investors have exposure to crypto.
Canada’s regulatory environment, particularly the approval of spot Bitcoin and Ethereum exchange-traded funds (ETFs) in 2021, has played a pivotal role in attracting local investors to the crypto asset class. Kareem Sadek, an executive at KPMG’s Digital Assets practice, noted that the recent approval of spot Bitcoin ETFs in the United States has also been a milestone moment for many Canadian market participants.
Increased Crypto Exposure
The recent survey by KPMG showcasing a rise in institutional investors’ crypto exposure in Canada is significant. This trend reflects a growing acceptance and interest in cryptocurrencies among traditional financial entities.
Several factors contribute to this trend. Firstly, cryptocurrencies offer potential value retention due to concerns about inflation and currency devaluation. Additionally, regulatory approvals, such as Canada’s approval of spot Bitcoin and Ethereum ETFs, have provided a regulated entry point for institutional investors, boosting their confidence in the asset class.
Challenges and Opportunities
The data shows that 39% of Canada’s institutional investors have exposure to crypto, and this indicates a growing trend toward diversification. While the increase in crypto exposure is promising, it also presents challenges. The volatility and regulatory uncertainties associated with cryptocurrencies remain concerns for institutional investors. However, improved market infrastructure and growing investor education are addressing some of these challenges.
The rise in institutional investors’ interest in cryptocurrencies in Canada signals a big change. It shows that big financial players are now seeing crypto as a serious investment option. This shift is because investors are worried about inflation and want assets that can hold their value well. The approval of Bitcoin and Ethereum ETFs in Canada also helped make crypto more accessible and safer for these investors.
However, there are still challenges. Cryptocurrencies can be very volatile, meaning their prices can change a lot very quickly. This makes some investors nervous. Plus, there’s always uncertainty about regulations, which can affect how people can use and invest in cryptocurrencies. Despite these challenges, the growing interest from big institutions is a positive sign. It shows that cryptocurrencies are becoming more mainstream and accepted in the world of finance.
Also Read: Caution: Betting on Dogecoin to reach $1 Is Risky Business, Analysts Warn.
