Security and Regulations Main Hurdle for Institutional Investors Regarding Crypto Investments (Survey)

1 month ago

Most institutional investors believe that the security of virtual assets and custodial services are the main reason that prevents many to enter the crypto market.

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According to recent research conducted by Nickel Digital Asset Management, nearly 75% of institutional investors and wealth managers stated that the security of virtual currencies is a “significant” hurdle stopping many individuals from entering the crypto space.

Low Confidence among Institutional Investors

The UK-based investment manager – Nickel Digital Asset Management – 

asked 100 global institutional investors and wealth managers to determine their biggest concerns related to crypto. The research included participants from well-developed economies such as the USA, the UK, the UAE, France, and Germany, who collectively own $275 billion in AUM.

The vast majority of them, with 76%, responded that concerns about the security of custodial services are the main factor that stops investors from jumping on the crypto bandwagon. Anatoly Crachilov – co-founder and CEO of Nickel Digital – noted:

“Whilst many forward-looking institutional investors are increasing their exposure to digital assets, our findings show that concerns around security and custody of these assets remain a top concern for many other allocators.”

A relatively smaller percentage of the respondents cited the regulatory environment for the crypto market as a major issue, while others opined that the lack of transparency and the volatile nature of the digital assets are significant obstacles.

Despite the negative statistics, Crachilov reminded that many large institutions had entered the space recently, which should lead to an increased level of security:

“We are now seeing Fidelity, BNY Mellon, and State Street entering the market, thus further reinforcing market infrastructure. All of this increases the confidence levels in the sector and lead to ever-growing allocations to this fast-developing asset class.”

High Hopes on Crypto on The Previous Survey

Earlier this month, Nickel Digital Asset Management conducted similar research, but that time the company asked if the institutional investors expect to increase their crypto exposure. The participants were again from the same countries as the aforementioned survey.

Per the results, 82% of the respondents who have already invested in digital assets will expand their crypto exposure between now and 2023. Asked whether they expect to “dramatically increase their holdings,” 40% said “yes.”

Nickel Digital Asset Management revealed that the main reason why the participants would invest more in cryptocurrencies is their long-term capital growth prospect – an explanation supported by 58% of the respondents. Interestingly, 37% stated they would copycat a giant corporation and allocate funds into the crypto market only if they see such an example.

Those who would sell their entire digital assets position were just 1% of the respondents, while 7% believe they should reduce their exposure.

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