In 2023, institutional investors in Canada expanded their exposure to crypto assets, with 39% of KPMG survey respondents dealing with the asset class in some way.
The KPMG consulting group recently conducted its bi-annual Institutional Adoption of Cryptoassets survey. It revealed that half of financial services respondents offered crypto asset services in 2023, and 39% of institutional investors surveyed had either direct or indirect crypto exposure.
Notably, the number of financial services organizations offering crypto asset products and services to clients has grown by 22% since 2021. Meanwhile, institutional investors that included crypto assets in their portfolios also increased, adding 26% to the statistics in the two-year period.
According to Kunal Bhasin, partner and co-leader of KPMG in Canada’s Digital Assets practice, increasing inflation and rising U.S. debt have likely contributed to the investors’ return to crypto after “a turbulent year, marked by fraud and collapses of major cryptoasset trading firms.”
Between 2021 and 2023, the number of institutional investors with exposure to crypto-related public equities grew from 36% to 58%. Moreover, 42% of surveyed respondents reported crypto exposure through derivatives (vs. 14% in 2021).
On average, financial services organizations offered two to three crypto service offerings, up from 1-2 services provided in 2021. Client demand for cryptoasset services was a major factor in expanding cryptoasset services for 80% of financial services respondents, up from half of companies surveyed in 2021.
Other important factors for the enhanced crypto activity of institutional investors include the maturing market and custody infrastructure (67% of investors cited it as key reasons behind their first investments in crypto assets).
“A pivotal moment for cryptoassets came in January 2024, when the U.S. Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs. That was considered a milestone event for many market participants. That attracted many traditional asset managers with strong reputations to the cryptoasset industry.”
Kareem Sadek, Emerging Technology Risk leader and co-leader of KPMG’s Digital Assets practice
The three most common types of services offered by financial services organizations include crypto asset trading, custody, clearing and settlement services, and quantitative trading. Less common crypto-related services are financial advice and wealth management, equity and debt capital market transactions for cryptoasset companies, and commercial banking services for cryptoasset organizations.
Significant statistical changes were observed in quantitative trading, which uses statistics, mathematical models, and analytics data from previous trading histories to identify the best trading opportunities. While in 2021, only 11% of respondents offered this service, in 2023, 38% of companies already provide quantitative trading. Meanwhile, the popularity of wealth management or providing financial advice has fallen from 42% in 2021 to 14% last year.
Institutional investors are also growing their investments in crypto assets. One-third said they’ve allocated at least 10% of their portfolios to cryptoassets, up from one-fifth two years ago.
Institutional interest towards crypto is growing not only in Canada. This January, Austrian fintech unicorn Bitpanda launched Bitpanda Wealth – a cryptocurrency trading platform catering to the growing demand for institutional crypto services in the EU.
