A recent survey conducted by KPMG in Canada and CAASA revealed that nearly four in ten Canadian institutional investors had exposure to crypto assets in 2023. This marks a significant increase from the previous year, with 39% of Canadian institutions reporting direct or indirect exposure to crypto assets, up from 31% in 2021. Despite a turbulent year in 2022, characterized by major collapses and fraud incidents within the crypto industry, institutional investors in Canada are increasingly viewing crypto assets as an investible alternative asset class. The survey also showed a significant rise in institutional investors holding cryptocurrencies directly, jumping from 29% in 2021 to 75% in 2023.
The survey also highlighted that Canadian institutional investors have maintained their exposure to crypto assets through exchange-traded funds (ETFs) and other regulated products, even in light of the approval of spot Bitcoin ETFs in the United States earlier this year. Approximately 50% of Canadian institutional investors have had exposure to crypto through ETFs and regulated products since 2021. Additionally, there has been a notable increase in Canadian institutional investors accessing crypto holdings via public equities and derivatives, indicating a growing interest and investment in the crypto market among these investors.
Mark Greenberg, Managing Director for Canada at Kraken, commented in an interview last year that crypto adoption continues to grow in Canada and is attracting mainstream interest among Canadians. He highlighted that adoption is increasing across all cohorts of the Canadian marketplace, including individuals, institutions, and various demographics. Greenberg expressed optimism about the future of crypto adoption in Canada, noting that the country has a high proportion of people underserved by the traditional financial system, making it ripe for crypto adoption.
On a global scale, analyst Mathew McDermott of Goldman Sachs predicted a significant increase in institutional interest in the crypto market in the coming year. He suggested that this heightened interest would contribute to broadening and deepening liquidity in the market, attracting institutional investors such as pension funds and insurance companies who may have been hesitant to engage with crypto assets directly in the past. Overall, the increased institutional interest in crypto assets is expected to have a positive impact on the market, drawing more traditional financial players into the rapidly evolving crypto space.
The approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) in January 2024 was identified as a pivotal moment for crypto assets, as it opened up new investment opportunities and regulatory clarity for institutional investors. This development, coupled with the increasing acceptance and integration of crypto assets within traditional financial systems, further signals the maturation and mainstream adoption of cryptocurrencies as a legitimate asset class. Institutional investors are increasingly recognizing the potential benefits and opportunities presented by crypto assets, leading them to explore and diversify their investment portfolios to include exposure to this burgeoning market. As the crypto industry continues to evolve and expand, it is likely that institutional interest and participation will play a significant role in shaping the future landscape of the digital asset space.
