The results of a KPMG survey reveal a significant uptick in Canadian institutional investors' involvement in cryptocurrencies compared to the previous bull market. According to the April 24 report, almost 40% of institutional investors indicated they had either direct or indirect exposure to cryptoassets in 2023, a notable increase from 31% in KPMG's 2021 study. The survey, which garnered 65 responses, identified 31 as institutional investors, many managing over $500 million in assets, with the remaining 34 representing financial services organizations.
Interestingly, the survey highlights a notable shift in portfolio allocation towards crypto assets among institutional investors. One-third of respondents reported allocating 10% or more of their portfolios to crypto assets, a significant rise from just one-fifth two years prior. Kunal Bhasin, partner and head of KPMG's Canadian digital assets practice, suggested that firms are increasingly exploring alternative asset classes to hedge against inflation, mounting debt, and seek reliable stores of value.
Investors' growing interest in crypto assets is attributed to several factors, including maturing markets and enhanced custody infrastructure. Financial institutions are also responding to increased customer demand for crypto asset services, prompting them to expand their product offerings. Kareem Sadek, another executive in KPMG’s digital assets business, pointed out that Canada's approval of spot Bitcoin and Ethereum exchange-traded funds (ETFs) in February 2021 has made the asset class increasingly appealing to local investors. He also noted the recent approval of a spot Bitcoin ETF in the U.S. as a significant milestone for Canadian market participants.
The report indicates that half of institutional investors have exposure to crypto assets through Canadian ETFs, closed-end trusts, or other regulated products, marking a notable increase from 36% in 2021. Additionally, 58% of respondents gain exposure through equity markets, such as the Toronto Stock Exchange’s Galaxy Digital. Furthermore, there has been a surge in institutional investors gaining exposure through derivatives markets, rising to 42% from 14% in 2021. The only category experiencing a decline in exposure is venture capital or hedge fund firms, dropping to 25% from 29% in 2021.
