A new survey conducted by KPMG in Canada and the Canadian Association of Alternative Assets and Strategies (CAASA) showed that in 2023, Canadian institutional investors and financial services organizations significantly increased their involvement in crypto assets.
The bi-annual survey, which gauges the trends and challenges influencing IT investments across various sectors, revealed a 22 percent increase in financial services organizations offering crypto asset products and services compared to 2021. Similarly, there was a 26 percent rise in institutional investors incorporating crypto assets into their portfolios.
These findings reflect a broader acceptance of crypto assets as viable investment options amidst a market rally and the introduction of more robust regulatory frameworks. Kunal Bhasin, partner and co-leader of KPMG in Canada's Digital Assets practice, noted that the economic environment, including rising U.S. debt and inflation, has likely spurred this renewed interest in crypto assets as alternative asset classes.
"The last time we did this survey in 2021, it was a strong year for crypto assets. The following year was a turbulent year, marked by fraud and collapses of major crypto asset trading firms, but those events had a cleansing effect on the industry," said Bhasin.
The survey indicated that half of the financial services respondents are now actively offering at least one type of crypto asset product or service to their clients, a significant increase from 41 percent in 2021. Moreover, 39 percent of institutional investors reported having direct or indirect exposure to crypto assets, up from 31 percent in the previous survey cycle.
Kareem Sadek, emerging technology risk leader at KPMG, emphasized Canada's role in fostering a conducive regulatory environment for crypto asset innovation. This has included the approval of the first Bitcoin and Ethereum exchange-traded funds, enhancing the appeal of crypto investments in the country.
The report also highlighted a shift in the investment strategies employed by these institutions. Now, more organizations are investing not only directly in crypto assets but also through regulated products like ETFs, public equities, and derivatives. This shift is backed by the significant performance improvement of major cryptocurrencies, with Bitcoin, for example, seeing a 150 percent price increase in 2023.
Despite the positive trends, the survey underscored a critical need for ongoing education and strategic planning around crypto asset investments. Bhasin advised institutions to develop clear roadmaps and internal policies that address operational and regulatory demands, ensuring a sustainable integration of crypto assets into their broader investment strategies.
This year's survey results were derived from responses collected from a diverse group of participants, including hedge funds, family offices, pension funds, and private equity firms.