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Migration to Digital Assets Accelerates

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25 October 2022

Key Findings from Celent's 2022 Survey of Global Institutional Asset Managers, Asset Owners, and Hedge Funds

Abstract

For many years the biggest question in the crypto investing world has been: “When will Institutional Investors enter the market?” That question has been answered: It has begun. What’s more interesting today is the ongoing level of engagement with digital assets. Celent's survey across 300+ traditional asset managers, asset owners, and hedge funds provides a data driven answer, showing significant numbers are investing, reaching a potential tipping point in adoption, but key conditions still need to be met for this to ramp up.

While crypto natives are looking forward to the day when all of capital markets infrastructure exists on an interoperable blockchain, the traditional Institutional Investor community has to date been less sure. This study shows that minds are changing, with traditional investors ready to imagine a world where up to one third of their portfolios will contain digital assets.

We found that a virtuous circle is set to power an accelerated adoption of digital assets. Despite the market gyrations 88% said they are still moving forward with current plans around digital assets.

The study findings suggests a need to support hybrid portfolios combining traditional and digital assets. Integrating old with new is a task well suited to TradFi, who have traditional rails firmly in place, supported with robust and often mandated capital, cyber, regulatory and compliance processes, putting these entities in an enviable position to continue to build market share as the regulatory picture clears and more institutional infrastructure goes live.

We found a majority of firms are currently actively engaging with a broad spectrum of digital assets especially focused on tokenization, staking, and access to DeFi. This engagement includes activities such as investing in the adjacent space, conducting Proof of Concepts (PoCs) with service providers or investing in building out internal expertise and skills in preparation for entering this space.

Incumbent custody banks, often citing client demand, have been ramping up offerings to support this space. Despite entering the market recently as compared to digital native custodians, our study found that traditional asset servicing and custody banks are being used by 35% of our survey respondents for digital asset services. TradFi custody banks are now finding themselves well positioned to continue to gain traction.