What kind of winter? Institutional attitudes toward crypto are rosier than you might think
Amid concerns over US cryptocurrency regulation and a resurgent bear market, an email from the digital assets team at a major international investment bank reminded me of the opposite and not to view the industry solely through an American lens.
Its title: “Major global study shows pension funds, fund managers, other institutional investors and wealth managers are positive about and planning to invest in digital assets.”
Is this from crypto-land Bizarro? I immediately thought of this episode of Seinfeld where Bizzaro is treated as a separate parallel universe where everything is the opposite of what is happening in this world.
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My recent experience, for example, involved recruiting staff from investment institutions to appear on stage at our Consensus conference, where many people are now afraid to go public for fear of being targeted by Elizabeth Warren’s “anti-crypto army”.
But no. This is a legitimate survey with some important results. (It was later covered by CoinDesk’s Sam Reynolds.)
The survey was conducted by Laser Digital, the digital assets group of Nomura, a well-known Wall Street and Japanese financial powerhouse. The team said its survey included “pension funds, wealth managers, family offices, hedge funds and mutual funds, insurance asset managers and sovereign wealth funds that jointly manage approximately $4.956 trillion in assets.”
Then he offered some startling numbers:
- 96% see digital assets as an investment diversification opportunity,
- 91% of digital assets “eliminate the risk of inflation and devaluation of fiat currencies,
- 82% are positive about the digital asset class in general and Bitcoin and Ethereum in particular over the next 12 months,
- Only 3% of respondents are negative and 15% are neutral about the outlook for the sector.
While the summary notes that there are implementation challenges and, not surprisingly, regulation as one of the main ones, it’s a surprisingly optimistic response from an industry that doesn’t like to publicize its views on crypto.
Here are my conclusions:
- Institutions have a deeper understanding and greater trust in cryptocurrency than ever before. The fact that respondents have strong positions in this sector is a sign that most are now aware and educated. This is a good thing.
- It was a global study. It included a variety of institutions in terms of structure, ownership, and geographic location. It brings a broader perspective to the industry than you hear from American banks and fund managers, who are more closely aligned with the language and mindset of Wall Street.
- The diametrical approach to cryptocurrency in other financial centers stems in part from the constructive attitude of governments. Hong Kong, Dubai, Singapore, London, Bermuda, Switzerland and Paris are financial centers associated with institutions and money managers from diverse backgrounds. Each has taken deliberate steps to create a legal framework for digital assets that allows for innovation in the space while imposing more or less compliance requirements. In the United States, we are embroiled in turf wars between the Securities and Exchange Commission and the Commodity Futures Trading Commission, and between Democrats and Republicans.
- In the midst of Crypto Winter, there is a swing of the pendulum towards the integration of blockchain technology into the existing financial system, with a particular focus on the tokenization of “real world assets”. This will help support and encourage institutional interest, as many are sitting on assets ready for tokenization. (Note, however, that survey respondents expressed interest in bitcoin as a hedge against fiat currency risk.)
- The crisis in the United States will pass. If the rest of the world collapses, the United States cannot afford to be isolated.
So be happy. There is a way out.
The views and opinions expressed herein are those of the author and reflect those of Nasdaq, Inc.
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