Institutional investors in Canada are showing a strong appetite for cryptocurrencies, with a new survey revealing a significant increase in adoption rates. The report, conducted by KPMG in Canada and the Canadian Association of Alternative Assets and Strategies (CAASA), paints a picture of a booming crypto market fueled by investor confidence and a supportive regulatory environment.
Crypto is going mainstream in Canada
In 2023, 39% of institutional investors surveyed said they would be exposed to crypto assets, a sharp increase from 31% just two years earlier. This new interest is translating into action, as a significant portion of these investors allocate a substantial portion of their portfolios to crypto.
The survey found that a third of participating institutions had placed at least 10% of their assets in crypto, demonstrating growing confidence in the long-term potential of this asset class.
This trend is accompanied by a corresponding expansion of crypto-related services offered by financial institutions. The survey found that half of participating financial services organizations now offer at least one type of crypto service, up from 41% in 2021.
These services cover a wide range, including trading platforms, custody solutions for custody of crypto assets, and quantitative trading strategies specifically designed for the crypto market.
Source: KPMG
Crypto diversification: beyond borders
The survey also highlights a growing trend towards diversification within the crypto investment landscape. Investors are no longer putting all their eggs in the Bitcoin basket. Although direct ownership of crypto assets remains popular, with 75% of institutions with exposure to cryptocurrencies holding them directly, a growing number are seeking exposure through other means.
These include regulated investment products such as exchange-traded funds (ETFs) and derivatives, which allow investors to participate in the market without directly owning the underlying crypto assets. Additionally, some institutions are gaining visibility through venture capital or hedge funds specializing in digital assets.
Total crypto market cap at $2.2 trillion on the daily chart: TradingView.com
Experts believe that several factors are driving this increase in institutional adoption of crypto in Canada. The crypto market rally in 2023, potentially fueled by economic factors such as inflation, has likely made crypto assets more attractive as alternative investment options and potential stores of value.
Additionally, Canada’s progressive stance on crypto regulation is seen as a major confidence builder for institutional investors. Recent regulatory approvals for Bitcoin and Ethereum ETFs, along with other support measures, have helped legitimize the crypto market and alleviate some of the risk concerns previously raised by institutional investors.
The Future of Crypto in Canada
Looking ahead, industry experts predict continued growth in crypto adoption by Canadian institutions. However, they emphasize the importance of education and careful planning for investors entering this new and volatile market.
The Canadian crypto market appears poised for continued growth, fueled by a combination of strong investor interest, an expanding service offering, and a supportive regulatory environment.
Featured image from Pixabay, chart from TradingView
