Canadian institutions are increasing their exposure to crypto-assets

Class in: Business, Science and Technology, Cryptocurrencies
Topic : Polls, Opinions and Research

As big investors and financial services firms embrace cryptoassets, retail investors feel more comfortable putting their own money in the space

MONTRAL, April 6, 2022 /CNW/ – While 2021 was the year of institutional adoption of crypto-assets, 2022 is shaping up to be the year of mainstream adoption of crypto-assets by financial services firms and their retail investors, according to three KPMG partners in Canada.

Crypto assets have become an alternative investable asset class among institutional investors, and many of them are exposed through regulated investment products like exchange-traded funds. Financial services firms are also integrating crypto-asset-related services alongside their existing lines of business by placing ETFs, offering advice on wealth management, custody, fund administration, compliance, clearing and holding. of march.

Retail investor interest in crypto-assets began with early adopters years ago, and since then we have seen a steady wave of institutional interest in this area – from pension funds and insurers to hedge funds and to family offices — with nearly a third telling us they have direct or indirect exposure to the asset class, said Kareem Sadek, partner and head of cryptoassets and blockchain at KPMG at Canadareferring to a survey conducted by KPMG in Canada and the Canadian Association of Alternative Strategies and Assets (CAASA) last fall.

Although institutional investors have told us that they are interested in the crypto space because they see it as an innovative technological game with high potential advantages, financial services companies are also interested in cryptoassets, but they are a somewhat more cautious due to the lack of clarity in the regulations Canada. Yet even with this regulatory uncertainty, nearly four in ten financial services companies we heard from offer crypto-asset services. We therefore believe that this will be a pivotal year for the adoption of cryptoassets among financial institutions.

Highlights – Survey of Canadian Institutional Investors and Financial Services Firms:

  • 32% of institutional investors surveyed have direct or indirect exposure to cryptoassets
    • 50% have exposure through exchange-traded funds, closed trusts or other regulated products
    • 36% have exposure to public stocks related to cryptocurrencies
    • 29% directly own crypto-assets
    • 29% invest as limited partners in a venture capital fund or hedge fund
  • 39% of financial services respondents offer services related to crypto-assets
    • 42% offer wealth management services or financial advice in the field
    • 33% provide custody, clearing or settlement services
    • 22% issue ETFs or regulated products
    • 11% provide liquidity for regulated products as content market

Among institutional investors surveyed,57% said they had invested in crypto-assets between 2020 and 2021, but most of the investments were relatively small, 71% of them allocating less than 2% of their portfolio to this asset category.

Institutional investors are increasingly increasing their exposure to cryptoassets to further diversify their portfolios, given the reduced ability of government bonds to act as portfolio buffers, said Chris Farkas, partner and national services consulting leader. financial services for asset management at KPMG in Canada. While this is a promising new space for institutional investors, it is clear that they are taking a cautious approach.

According to GeoffRush, partner and national financial services industry leader, more financial services organizations will offer crypto-asset-related services in 2022. Nearly seven in ten financial services companies told us they were considering offering services related to crypto-assets, and six in ten told us that they were moving from analyzing opportunities and developing crypto-asset strategies to creating crypto-asset products and services and onboarding customers. So it’s a noticeable change, he added.

Retail investors interested in cryptocurrency

An additional survey conducted by KPMG in Canada reveals growing retail investor interest in cryptoassets, but most are waiting to see what institutional investors plan to do in this area before adding them to their portfolios.

According to a KPMG survey of more than 1,000 Canadians, 13% of respondents bought bitcoins or ethereum directly, while 11% have purchased exchange-traded funds or other crypto-asset funds. One in five who had not yet invested said they were ready to make direct and/or indirect investments.

Almost a quarter (23%) highlighted that they would be more comfortable investing in this sector as more institutional investors adopt cryptoassets and more than half (54%) mentioned that they intend to let institutional investors test the waters before taking the plunge.

The Canadians of under 35 and men of all ages were more likely to have invested in crypto-assets and want exposure to this asset class.

Highlights from the survey of Canadians:

  • 13% of respondents have directly purchased crypto-assets such as bitcoins or ethereum (17% of men against 8% of women)
  • 11% bought Bitcoin ETFs or other crypto-asset funds (14% of men against 8% of women)

age

Respondents who bought crypto-assets directly like bitcoins or ethereum

Respondents who purchased Bitcoin ETFs or other crypto-asset funds

18-24

24%

20%

25-34

23%

15%

35-44

19%

14%

45-54

10%

12%

55-64

5%

6%

  • 21% of respondents who had not yet invested are interested in directly buying cryptoassets such as bitcoins or ethereum (25% men vs 17% of women)
  • 21% were interested in buying Bitcoin ETFs or other crypto funds (25% of men against 18% of women)

age

Do you want to directly buy cryptoassets like bitcoin or ethereum?

Want to buy bitcoin ETFs or other cryptoasset funds?

18-24

31%

37%

25-34

33%

31%

35-44

22%

24%

45-54

21%

21%

55-64

10%

15%

Interestingly, but not surprisingly, 18- to 34-year-olds are more likely to buy cryptoassets, given the generally higher risk appetite and longer investment horizons of younger investors. For financial services firms looking to build or add to their crypto-asset service offering, this is a key demographic they should pay close attention to, says GeoffRush.

To learn more about the institutional adoption of cryptoassets in Canadaconsult The Growing Adoption Of Cryptoassets In Canada

KPMG at Canada surveyed 1009 Canadians between February 14-16, 2022 on the Schlesinger Group’s Asking Canadians panel on the online research platform Methodify.

KPMG and the Canadian Association of Alternative Strategies and Assets (CAASA) also surveyed institutional investors and financial services companies doing business in the Canada. The survey was run to CAASA members and KPMG clients and received 75 responses between August 30 and October 31, 2021.

A word about KPMG at Canada

KPMG LLP, an auditing, tax and advisory firm (kpmg.ca) and a Canadian limited liability company owned and operated by Canadians. For more than 150 years, our professionals have provided Canadians with a range of advisory, accounting, auditing and tax services that inspire trust, foster change and drive innovation. Guided byfundamental values— Integrity, Excellence, Courage, Together, For the better — KPMG has more than 10,000 professionals and employees in more than 40 offices around Canada, which serves both private and public sector clients. KPMG doesregularlyone of the best employers in the Canada and is recognized as one of the best workplaces in the country.

The Firm is incorporated under the laws of theOntario and a member of the KPMG global organization of affiliated independent firms KPMG International Limited, an English company limited by guarantee. Each member of the Cabinet is a distinct and independent legal person, and describes himself as such. For more information, seehome.kpmg/ca/en.

SOURCEKPMG LLP

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Canadian institutions are increasing their exposure to crypto-assets


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