Institutional investors in Canada have significantly increased their exposure to cryptocurrency assets in the past year compared to the previous bull market cycle. A recent survey conducted by accounting firm KPMG shed light on this growing trend among institutional investors. The consulting group’s bi-annual survey, titled “Institutional Adoption of Cryptoassets,” received responses from 65 participants, including 31 institutional investors managing assets exceeding $500 million and 34 financial services organizations.
The survey results revealed that a considerable 39% of institutional investors reported having direct or indirect exposure to crypto assets in 2023, a notable increase from the 31% reported in KPMG’s 2021 study. Moreover, half of the financial services organizations stated that they offered crypto asset services in 2023, up from 41% in 2021. One of the key driving factors behind institutional investors’ interest in crypto assets was identified as a maturing market and improved custody infrastructure.
Last year saw a significant influx of cryptocurrency companies relocating a portion of their operations to Canada due to heightened regulatory crackdowns in the United States. Notably, Coinbase expanded its presence to the Canadian West Coast, praising the country’s “regulation by engagement” approach over strict enforcement measures. The approval of spot Bitcoin and Ethereum exchange-traded funds (ETFs) in Canada in February 2021 played a pivotal role in attracting local investors to the crypto asset class, according to industry experts.
The KPMG report unveiled that half of the institutional investors surveyed have exposure to crypto assets through Canadian ETFs, close-ended trusts, or other regulated products. Furthermore, 58% have exposure through the stock market, demonstrating a significant increase from 36% in 2021. Another notable trend is the rise in institutional investors gaining exposure through derivatives markets, which saw a surge to 42% compared to 14% in 2021. However, there was a slight decline observed in venture capital or hedge fund firms, dropping to 25% from 29% in 2021.
Kunal Bhasin, a partner and leader at KPMG Canada’s Digital Assets practice, highlighted that institutional investors are increasingly exploring investments in alternative asset classes to hedge against debasement and serve as reliable stores of value. This trend is particularly prevalent amidst concerns about escalating inflation and mounting debt in the United States. Financial services organizations cited rising client demand for crypto asset services as a significant driver behind their expansion into this space, indicating a shift in investor preferences towards the crypto market.
The growing trend of institutional investors in the Canadian crypto market signifies a broader acceptance and adoption of digital assets within the traditional financial sector. With regulatory support and increased market maturity, Canada has emerged as a favorable destination for institutional investors looking to diversify their portfolios and capitalize on the potential growth opportunities offered by the crypto market.