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Resurgence of Cryptoassets in Canada’s Investment Landscape
Survey Results | April 25, 2024
Image: Freepik
2023 Canadian Institutional Adoption of Crypto Assets
About the Survey: The latest 2023 Institutional Adoption of Crypto Assets survey conducted by KPMG in Canada and the Canadian Association of Alternative Assets and Strategies (CAASA) reveals increased adoption and innovative practices in digital currencies.
See: Investors Launch Argo Digital Gold to Tokenize Gold
The survey received 65 responses, including 31 from institutional investors and 34 from financial services organizations with operations in Canada. The institutional investors comprised a diverse group, including hedge funds, family offices, high net worth individuals, pension funds, endowments and foundations, as well as private equity and venture capital firms.
Cryptoasset Services Expand
- 2023 saw an uptick in financial institutions embracing cryptoassets, with 50% of survey respondents affirming their offerings of at least one type of cryptoasset service, a significant rise from 41% in 2021. This growth is attributed to a more robust regulatory framework and a rising inclination towards alternative asset classes.
- Cryptoasset trading surged, with 52% of financial services now providing this service.
- There was a marked increase in custody, clearing, and settlement services — from 33% to 48% — signaling an enhanced infrastructure to facilitate secure and efficient transactions.
- The quantitative trading sector witnessed the most dramatic increase, jumping from 11% in 2021 to 38% in 2023. This indicates a shift towards more sophisticated, data-driven investment strategies, reflecting an industry maturing in its approach to leveraging digital assets.
See: OSC: 2023 Canadian Crypto Survey Insights
- Conversely, there was a notable decrease in the provision of wealth management and financial advice related to cryptoassets, possibly reflecting a strategic realignment.
Kunal Bhasin, partner and co-leader of KPMG in Canada's Digital Assets practice:
"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. 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. Our survey findings suggest cryptoassets are increasingly seen as an investible alternative asset class among such institutional investors and financial services organizations in Canada."
Institutional Investors Broaden Their Crypto Horizons
Institutional investors have expanded their exposure to cryptoassets. Nearly four in ten (39%) reported having either direct or indirect exposure in 2023, up from 31% in 2021. This growing interest is particularly pronounced in direct ownership, where 75% of institutional respondents now hold cryptoassets directly, a substantial increase from just 29% two years prior.
See: CSA Updates on Value-Referenced Crypto Assets Regulation
Investment strategies have diversified as well, with a significant uptick in the adoption of derivatives and crypto-related public equities. Exposure through derivatives has seen a remarkable rise, from 14% in 2021 to 42% in 2023, offering investors tools for hedging, speculation, and accessing the market in a risk-managed manner. Similarly, investments in crypto-related public equities have escalated, reflecting a strengthened confidence in the crypto market's integration with traditional financial systems.
Looking Forward
The cryptoasset market in Canada is positioned for continued growth, with supporting regulatory actions and increasing institutional acceptance. Innovations such as the approval of spot Bitcoin ETFs in the U.S., and anticipated Ethereum ETFs signal a maturing market ready to offer more diversified and secure investment opportunities.
See: Chainlink Transporter Launches: Secure Cross-Chain Crypto Bridging
As Canadian financial institutions and investors increase interest, the emphasis will likely remain on education, strategic investment, and the development of robust infrastructures to support these digital assets. The integration of cryptoassets into mainstream portfolios suggests that investors recognize their potential to reshape investment strategies amidst a digitally transforming world. The insights from the 2023 survey sums up Canada's approach to cryptoassets — from cautious observation to proactive engagement.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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