Institutional investors in Canada have significantly increased their exposure to cryptocurrency assets over the past year, as revealed by a recent survey conducted by KPMG. The survey, titled “Institutional Adoption of Cryptoassets,” received responses from 65 participants, including institutional investors managing assets exceeding $500 million and financial services organizations. The data showed a notable rise in institutional adoption, with 39% of investors having direct or indirect exposure to crypto assets in 2023, compared to 31% in 2021. This trend indicates a growing interest in digital assets within the Canadian investment landscape.
Kunal Bhasin, a partner at KPMG Canada’s Digital Assets practice, highlighted the shift towards alternative asset classes by firms seeking to hedge against economic uncertainties like inflation and rising debt. The survey indicated that one-third of institutional investors had allocated 10% or more of their portfolios to crypto assets, signaling a strategic diversification approach. The growing adoption of crypto assets can also be attributed to the maturing market and advancements in custody infrastructure, making it more accessible and appealing to traditional financial institutions.
Canada has emerged as a favorable destination for cryptocurrency companies, with many relocating operations from the United States due to regulatory pressures. The country’s regulatory approach, characterized by “regulation by engagement,” has encouraged firms like Coinbase to establish a presence in regions like the Canadian West Coast. The approval of spot Bitcoin and Ethereum exchange-traded funds (ETFs) in Canada further boosted investor confidence and attracted local stakeholders to the crypto market. While the United States has also approved spot Bitcoin ETFs, Canada’s regulatory leniency and the surge in crypto asset prices have contributed to a heightened interest from institutional investors in the country.
The survey data revealed that institutional investors are utilizing various investment vehicles to gain exposure to crypto assets. Half of the respondents reported having exposure through Canadian ETFs, close-ended trusts, or other regulated products. This diversification strategy allows investors to access the crypto market through established and compliant channels. Furthermore, the increased presence of crypto-related assets in traditional stock markets, such as Galaxy Digital on the Toronto Stock Exchange, has provided additional avenues for institutional investment. The growing utilization of derivatives markets to gain exposure to digital assets also signifies a shift towards more sophisticated financial instruments among institutional players.
Despite the overall positive trend in institutional adoption of crypto assets, the survey noted a slight decline in exposure through venture capital or hedge fund firms. This suggests a potential shift in investment strategies or risk appetite within certain segments of the institutional investor community. As the crypto market continues to evolve and mature, institutions will need to navigate regulatory complexities, market volatility, and technological advancements to capitalize on the opportunities presented by digital assets. Continued education, strategic partnerships, and regulatory clarity will be crucial in facilitating the ongoing integration of crypto assets into traditional investment portfolios.
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