2023 sees a surge in cryptoasset investments among Canadian institutions, driven by regulatory clarity and market growth
In 2023, institutional investors in Canada significantly increased their engagement with cryptoassets, encouraged by a more favourable market and improved regulatory conditions.
This was highlighted in a bi-annual survey conducted by KPMG in Canada and the Canadian Association of Alternative Assets and Strategies (CAASA), which documented a notable rise in the adoption of cryptoasset products and services compared to 2021.
The survey revealed that 39 percent of institutional investors had direct or indirect exposure to cryptoassets, an increase from 31 percent in 2021. Notably, 75 percent of these investors owned cryptoassets directly, a dramatic rise from just 29 percent two years earlier.
Additionally, a third of the investors had allocated at least 10 percent of their portfolios to cryptoassets, up from a fifth in 2021.
Kunal Bhasin, partner and co-leader of KPMG in Canada's Digital Assets practice, commented, “Rising US 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.”
Furthermore, Kareem Sadek, Emerging Technology Risk leader and co-leader of KPMG’s Digital Assets practice, emphasized the role of regulatory developments in attracting institutional interest.
“Canada has played a leading role in creating a regulatory environment that supports innovation in cryptoassets, from approving the first Bitcoin and Ethereum exchange-traded funds to allowing sophisticated strategies involving derivatives and Ethereum staking,” said Sadek.
He suggested that these regulatory advancements, coupled with the rising prices of cryptoassets, are likely reasons why institutional investors have been increasingly attracted to the crypto space.
The increasing institutional engagement is also reflected in the diversity of investment strategies employed by these entities.
Institutional investors are not only directly purchasing cryptoassets but are also increasingly investing in regulated products such as exchange-traded funds, public equities, and derivatives.
As institutional investors continue to deepen their involvement in the cryptoasset market, the survey indicates a strategic shift towards incorporating these assets as a core component of diversified investment portfolios.
This trend is expected to persist, driven by ongoing market development and supportive regulatory frameworks, thus further integrating cryptoasset investment into Canada's broader financial landscape.
