The roundtables built on research carried out by Ocorian in 2023 and discussed the main trends facing the trustee of today and the future: philanthropy, succession planning, ESG and digital assets. The latter, all participants agreed, is the one which will alter the landscape of the industry the most up to 2030.

“Digital assets aren’t a trend or fad; they’re here to stay. The industry is now 15 years old, it’s a USD2 trillion business and there are 560 million crypto accounts worldwide; those are not the numbers of an industry that’s going to fade out of fashion,” Ocorian’s newly published 2030 Trustee Roundtable Report states.

The report outlines that the maturation of a generation of digital natives and the younger generation’s appetite for greater risk in search of returns are the main reasons for the rise in popularity of digital assets, and highlights that the industry needs to respond to this demand.

“The figures show that digital is here to stay; the question is whether the private client industry can adapt quickly enough to become the trusted advisors who these clients turn to,” says Ben Grolimund of Rain – a crypto-exchange platform in the Middle East, one of the roundtable participants.

Regulators around the world are starting to respond, the report states. The Monetary Authority of Singapore (MAS) expanded the scope of its regulated payment services framework in April 2024, amending the law to govern digital payment tokens; in South Korea, an act regulating the cryptocurrency market came into force in July 2024; and the EU’s Markets in Crypto-Assets Regulation (MiCAR) is being implemented in two stages in 2024.

Leevyn Isabel, Commercial Director at Ocorian, says: “Private clients have always sought privacy and convenience, and digital assets can provide them with that to some extent, so it’s likely to become a more popular asset class up to 2030. The watching brief for our industry is to see how regulation, especially vis-a-vis transparency, responds and starts to manage the class. Whatever happens, it’s a huge growth area and will totally shape the private client ecosystem to 2030 and beyond.”

Annerien Hurter, Global Head of Private Client at Ocorian, says: “Our 2030 Trustee Roundtable Report brings together some of the leading voices in our industry to take a holistic look at the trends that will shape our profession. We’re grateful to everyone who took part and are pleased to share what we believe is a fantastic resource for practitioners and clients alike. We’re going to witness some significant changes over the next six years, with digital assets at the forefront of that, and it’s never too early to adapt and prepare.”

In June of 2023, OKX joined Komainu’s collateral management platform, Komainu Connect, to offer a secure off-exchange settlement solution for its institutional clients. This solution allows institutional clients to trade segregated assets under custody through the OKX platform 24/7. By providing clients with the ability to store assets with a regulated third-party custodian, whilst trading on exchange, this solution allows clients to better manage their counterparty risk, the firm writes.

The firm writes that the latest enhancements to OKX and Komainu’s off-exchange solution now include the following improvements for institutional clients:

Greater scale and support: Supporting both spot and derivatives transactions on OKX

Automated settlement: Client profit and losses are settled automatically between OKX and the client’s collateral wallet in Komainu, enhancing capital efficiency and further reducing counterparty risk

24/7 collateral adjustment: Ability to adjust the amount of collateral delegated to OKX from the client’s regulated collateral wallet, held in Komainu’s custody. Delegation is available 24/7 from the Komainu portal

Detailed transaction and settlement history: Clients can access this information through the Komainu portal

Holistic view of custody and collateral wallets: Providing improved audit capabilities by consolidating relevant information in one place

With the continued influx of institutional traders in the crypto space, OKX and Komainu’s off-exchange solution has attracted a range of digital asset firms seeking an innovative and secure way to trade OKX products, the firm says. Available 24/7, this solution offers clients optimised capital use through real-time collateral mirroring and intraday settlement modes, enhancing liquidity and trading efficiency.

On November 15, 2023, OKX announced its collaboration with Komainu, which included CoinShares as the first client, empowering CoinShares to conduct 24/7 trading through the OKX platform while assets are held in segregated custody with Komainu.

OKX Global Chief Commercial Officer Lennix Lai says: “Institutional clients require the highest levels of security and efficiency, and our custody partnerships deliver this for a range of client needs. Our expanded partnership with Komainu combines their regulated custodial services with our robust trading infrastructure and deep liquidity to offer greater scale and support for off-exchange custody clients who execute spot and derivatives transactions on our platform.”

Paul Frost-Smith, Co-CEO at Komainu says: “We are excited to expand our reach, offering our enhanced OKX off-exchange solution to more clients. This collaboration is testament to our mission of providing secure and compliant digital asset servicing solutions.”

Robert Johnson, Co-CEO at Komainu, adds: “By leveraging our industry-leading custodial offering and OKX’s robust trading infrastructure, we are building a high-quality network for our clients, to deliver a frictionless, segregated and secure experience.”

Key findings include:

Digital asset investments rise as regulatory clarity and ETFs boost confidence: Nearly half (47 per cent) of traditional hedge funds surveyed this year have exposure to digital assets, up from 29 per cent in 2023 and 37 per cent in 2022, driven by increased regulatory clarity and the launch of spot cryptocurrency ETFs in Asia and the US.

Among those already invested, 67 per cent plan to increase their exposure over the next year, with none planning to reduce, a marked increase from 46 per cent a year ago. This may be spurred on by the successful launch of spot bitcoin ETFs, which 64 per cent of respondents view as a positive development for the digital assets industry.

More sophisticated investment strategies, shifting to derivatives: There has been a notable shift towards derivative trading in digital assets by traditional hedge funds, with its use rising to 58 per cent in 2024 (up from 38 per cent in 2023), while spot trading dropped to 25 per cent this year after peaking at 69 per cent last year.

Growing interest in tokenisation despite regulatory challenges: Interest in fund tokenisation is also growing, with 33 per cent of hedge fund respondents either committed to or exploring tokenisation, compared to around a quarter of traditional hedge funds last year.

Rising institutional client demand: 43 per cent of traditional hedge funds—whether invested or not in digital assets—are seeing increased interest from institutional clients. The report finds that, currently, family offices and high-net-worth individuals (HNWIs) remain the largest investor categories in digital asset focused hedge funds, followed by fund of funds.

Hedge fund sector remains cautious: Despite the industry’s growth, many traditional hedge fund managers remain hesitant, with 76 per cent of those not currently invested in digital assets unlikely to enter the space within the next three years, up from 54 per cent in 2023. The top barrier, cited by 38 per cent of funds, is the exclusion of digital assets from investment mandates, rising from fourth place last year. While regulatory uncertainty remains a key concern, it has eased somewhat due to the adoption of clearer regulatory frameworks like the EU’s MiCA.

“Increased regulatory clarity and rising institutional client demand are driving increased investment appetite in digital assets from hedge funds, with nearly half (47 per cent) of traditional hedge funds surveyed this year having exposure to the asset class – up from 29 per cent in 2023 and 37 per cent in 2022,” says Albertha Charles, PwC Global Asset & Wealth Management Leader.

“Despite the industry’s growth, the hedge fund sector still remains cautious – with 38 per cent of traditional hedge funds citing exclusion of digital assets from investment mandates as the top barrier to entering the market.”

The firm writes that the updates further expand Wintermute’s OTC derivatives offering with the introduction of GMCI index trading as an instrument for contracts for differences (CFDs), marking Wintermute as the first OTC desk to provide this capability. Additionally, CFD trading is now accessible directly through NODE, alongside Wintermute’s industry-standard FIX API or chat. The update also introduces a revamped NODE user interface and enables the use of virtually any fiat or crypto asset as collateral for margin in derivatives trading via NODE.

Wintermute’s crypto CFD trading volume has surged 19-fold from March to August this year, reflecting significant growth since the product’s introduction in February. Anticipating continued market demand for OTC-cleared derivatives, CFD trading is now available directly via Wintermute NODE, along with multicurrency collateral support for margin that launched earlier this summer. With just a few clicks, Wintermute counterparties can now easily access CFD OTC trading and use a wide range of assets, including cryptocurrencies, fiat, and even Liquid Staking Tokens, to collateralize margin for derivatives trading directly on NODE.

Rounding off the offering, Wintermute now allows trading of GMCI indices as an instrument for CFDs, providing counterparties with a simplified, yet diversified way to gain market exposure to digital assets. Index trading allows investors to capture broad market trends by focusing on entire sectors, providing a diversified portfolio while reducing the risks associated with the volatility of individual assets. Using indices as the basis for CFDs enables traders to gain leveraged exposure to the market, and quickly access and react to market movements, without owning the underlying assets. The first GMCI indices available for trading include GMCI 30, GMCI MEME, GMCI AI, GMCI L1, and GMCI L2, with more indices available for pricing on demand.

Evgeny Gaevoy, CEO of Wintermute, says: “While crypto derivatives are still in the early stages of growth, we believe their adoption and market expansion will surpass anything seen in traditional finance. At Wintermute, our goal is to meet this demand by providing our counterparties with best-in-class trading tools and the most comprehensive OTC offering. This year, we are particularly focused on enhancing our derivatives suite, with a strong emphasis on CFDs. Adding CFD support and enabling CFD index trading on our electronic OTC trading platform, NODE, is a natural progression following our earlier updates this year. It allows us to serve a broader range of counterparties, whether they seek quick, hassle-free access without the need for integration, or want to complement their existing trading via API or chat”.

This is a non-directional multi-strategy fund which wraps a portfolio of attractive but hard-to-access and capacity-constrained strategies into a single, investible fund.

Data from BarclayHedge shows it achieved an 18.6 per cent net return in the first half of 2024, a record performance since the fund’s inception in February 2021. The digital asset fund has also demonstrated resilience and generated returns across both flat and falling market regimes, including April and June this year when the underlying crypto market fell by double digits and in January when the market was flat.

The fund was up 34.1 per cent for the 12 months to 30 June with a 12-month rolling Sharpe of approx 3.2 and Sortino of 4.3.

The firm writes that the year-to-date net return on Diversified Alpha significantly outstrips the returns of 5.3 per cent and 2.9 per cent for the HFRX Equity Market Neutral Index (Flagship Funds) and the HFRX Global Hedge Fund Index, respectively. It is also leading the performance league table for 1H24 for the global hedge funds in multimanager category.

“Establishing a hedge fund is both costly and time-consuming, and generally requires 10s of millions in AUM to cover operational and compliance expenses. Traditional capital introduction services, which typically provide funding for startup funds, are not offered by conventional banks due to the absence of crypto prime brokerage services.” 

The firm writes that it has successfully allocated over USD100 million to quantitative systematic crypto traders through its Diversified Alpha fund. “This milestone highlights Nickel’s continued expansion and strategic commitment to deploying capital to high-octane trading strategies, reinforcing its position as a market leader in digital asset management.”

Nickel writes that its Diversified Alpha fund uses a managed account structure to provide funding to an actively expanding global community of quant digital asset managers while allowing allocators to maintain tight risk oversight of their funds. This structure facilitates trading on leading spot and derivative exchanges while leveraging Nickel’s advanced trade execution platform, the firm says. 

Nickel writes that at the core of its offering is its cutting-edge technology platform, which enables managers to send trading signals to Nickel’s execution system, supported by real-time risk management and margin management systems that operate 24/7/365. “With a streamlined onboarding process refined over years, Nickel aims to have promising managers begin with test allocations within a few days, ensuring robust risk assessment based on internally gathered risk information and track record before full deployment.”

Since its inception, Nickel writes that its approach has delivered impressive returns, with allocators earning an estimated 50 per cent (net) since the fund’s inception in 2021, and 18 per cent (net) year-to-date. “These robust results reflect the efficacy and resilience of the quant managers and Nickel’s risk management systems,” the firm says.

“Nickel’s model provides fund managers with unmatched independence and benefits. Key advantages include a transparent performance fee structure and full control over trading strategies within defined risk limits and capital allocations. Nickel guarantees not to copy trade, or impose non-competes or lock-ins, ensuring managers retain ownership of their intellectual property.

“Having allocated resources to over 20 managers, Nickel is actively engaged in further selection of outstanding systematic managers to scale up highly performing teams. This ongoing expansion aims to harness diverse expertise and further enhance the fund’s performance.”

Its study with finance firms in the US, Asia, Europe and the Middle East responsible for more than USD221.75 billion assets under management found 91 per cent handle real world digital assets, such as digital or tokenised securities or commodities and those who have not done so plan to in the future, with 100 per cent respondents intending on doing so if they do not already.

The 91 per cent are most likely to have handled tokenised corporate debt, alternative funds and sovereign debt, the research by GDF, which is focused on accelerating digital finance through the adoption of best practices and standards and engagement with regulators and policymakers, found.

Nearly nine out of 10 (87 per cent) questioned said they plan to use deposit tokens or Central Bank Digital Currencies (CBDCs). Currently firms rely on other cash leg solutions, with 57 per cent of firms deploying stablecoins and 66 per cent deploying proprietary coins to on and off ramp.

The research highlights a movement in RWA tokenisation from PoC to production which echoes comments earlier this year from Larry Fink, the CEO of BlackRock that the “next step going forward will be the tokenisation of financial assets.”

Madeleine Boys, Head of Programmes and Innovation at GDF said: “Tokenisation is rapidly moving from being an interesting innovation to becoming part and parcel of financial institutions’ digitisation strategies, and McKinsey estimates that around USD120 billion is already tokenised in the form of stablecoins.

The research shows that the vast majority of major financial institutions questioned are already handling tokenised real-world assets and all intend to do so, underlining the extent to which organisations are engaging with the sector.”

The firm writes that this represents a 196 per cent increase in the value of their holdings compared to a year ago, when the corresponding figure was USD7.2 billion.

Publicly traded companies have emerged as major players in the digital assets ecosystem after MicroStrategy pioneered the integration of bitcoin into corporate treasuries when it purchased 21,454 BTC in August 2020. The company, which has increased its holdings almost tenfold (214,246 BTC to date) making it one of the largest institutional holders of bitcoin, paved the way for other notable public companies, such as Tesla, to follow.

Collectively, listed companies have expanded the size of their holdings by 19 per cent in the last year, following the purchase of a further 48,730 bitcoins. As a result, they now hold 309,637 BTC, equating to 1.5 per cent of the total bitcoin supply cap, which is pegged at 21 million.

Nickel Digital’s analysis highlights a strong North American bias in these allocations. Nearly three-quarters of the 38 listed companies reviewed are US (15) and Canadian (13) businesses, four are European, and the remaining six companies are from Turkey, Thailand, Australia, Japan, Argentina, and Hong Kong.

Private companies also play an influential role in the digital assets market, with 11 entities accumulating 525,460 bitcoins to date. The corresponding figure a year ago was 316,067 BTC, therefore representing a 66 per cent increase. Additionally, the total value of their bitcoin holdings has more than quadrupled in the same period to USD36.3 billion. Among the private companies with bitcoin holdings is blockchain solutions provider Block.one, the company behind the EOS blockchain.

The data shows there are two unlisted companies in the US, Switzerland and Hong Kong, and one in each of Gibraltar, Norway, Seychelles, Japan and Singapore.

Global research by Nickel Digital reveals growing mainstream acceptance of digital assets. Nearly nine out of 10 (87 per cent) institutional investors and wealth managers believe digital assets have an important role to play in diversified investment portfolios, with half (50 per cent) saying digital assets should represent a moderate portion of portfolios.

Anatoly Crachilov, CEO at Nickel Digital, says: “This analysis highlights the growing use of Bitcoin as a treasury reserve asset by companies seeking to diversify their balance sheets. This significant institutional presence is helping to dive the wider adoption and long-term price stability of bitcoin, whilst demonstrating its strong potential as an alternative treasury management tool.”

Typically, prices start to rise. They attract new interest. There’s new buzz and projects that have been building through the bear market launch. Because the market is more receptive, it attracts new developer talent that build new projects, and those plant the seeds for the next cycle. And that flywheel continues until you hit the exuberance stage. Then you get into a bubble and prices collapse. The excitement is gone and it’s back to building again until the new cycle. 

What we’re seeing now is that we’re now clearly in the early stages of a new cycle, which is actually the fifth such “price innovation cycle”, as we call them. So liquid prices are moving up. And, as typically is the case, it’s led by bitcoin. We’ve seen the first seeds that were planted in the last cycle go live and unlock new possibilities. Very clearly this time around, it’s around scalability of the technology, which opens up the technology to new use cases such as gaming and social and entertainment.

So now bitcoin is at a new high, but most other liquid prices are still well below 50 per cent off from their peaks. And if we look at previous cycles for some indication, we would expect things to heat up over the next 12 to 18 months, probably hitting peak excitement somewhere next year. Estimates of where the market cap outside of bitcoin can go is from the current USD1.3 trillion in liquid markets to somewhere between USD4 and USD10 trillion. So this is an enormous opportunity.

We believe that an even better way to invest in this technological revolution is not through the liquid tokens but through backing the founders that are building the future blockchain networks, in their earliest, private funding rounds. Blockchain technology is the foundation for a trustless economy, and most of the new infrastructure is still to be built. It will disrupt the trusted intermediaries that today are needed for people to transact with each other and will propel our financial systems and commerce into the digital age, much as the previous generation of internet protocols revolutionized information and media.

Accessing the private funding rounds is difficult though, and requires both deep, specialised knowledge and value add to founders. As a result, the most promising projects are fully funded by a relatively small group of crypto-native venture capital firms. And in contrast to the liquid markets, the private market structure still very much reflects a bear market. All generalist VCs are still gone and early-stage valuations remain attractive despite an initial increase from the troughs. 

The best way to think about the attractiveness of the early, private rounds is the stack of structural advantages that largely stem from the nascency and the uniqueness of this industry and how counterintuitive it is, all factors that keep most traditional investors still at bay. 

Most importantly, there is a massive knowledge gap. Very few investors have the deep technical know-how that is required to know what needs to be built and to diligence the founders that claim to build it.  Another point is that, as a founder, if you build a decentralised protocol, by definition, you cannot hold on to complete ownership. 

You have to distribute ownership early on. So founders will sell part of the future protocol early on to those that provide the most added value and also the strongest signal to the community to which they they look to distribute the protocol. And then there is the early liquidity compared to traditional venture investments. Most protocols take one to four years to be built before they are launched publicly. For the private phase VCs that offers the choice of holding on to the liquid tokens in the public phase or to realize the investment early. 

Over six years ago we identified the attractiveness of investing in this new infrastructure in the earliest, private-stage phases. Since then we have relentlessly focused on building deep relationships with all the top specialised VC firms and many of the industry’s leading founders. This has given us early, private-stage access to the vast majority of successful projects launching over the past years. While accessing the best early-stage deals is getting more and more competitive as the industry matures, the industry is still quite nascent and our approach demonstrates that it can be done with conviction in the technology.

Bruce Jackson is Chief of Digital assets Funds and Business at Apex, and a board member of Issuance.Swiss AG, a new foundation structure designed to enable asset managers to sell cryptocurrency strategies into their clients’ conventional accounts, from an arm’s length entity. 

Of Apex’s USD3 trillion in AUA, USD2 trillion is in relatively illiquid alternative strategies, with the remainder in open ended funds and SPV holding structures for institutions and large investors.  Jackson says that the firm’s digital team is leading the industry in tokenising these conventional fund products for their clients. 

“We enable our clients to put conventional fund products into digital accounts, by creating a digital share class, and a blockchain-based registry,” he says.

This month, the Luxembourg regulatory regime has given approval for Sygnum Bank, Hamilton Lane and Apex to create this structure, offering a digital share class of the Hamilton Lane GPA Fund for subscription, directly into a Sygnum Bank crypto account.

“We will administer this using the blockchain as the book of record,” Jackson adds.

“Normally, investing with Hamilton Lane requires a minimum USD5 million subscription, confining availability to institutional investors and large family offices. This digital share class enables a much wider group of investors to invest as little as USD1,000 with Hamilton Lane.  We could have created a feeder fund, but that would add cost and illiquidity. Hamilton Lane wished to deliver their industry-leading alpha directly into their client’s accounts, large and small.” 

“We are again creating an automated platform, offering a new channel for AUM growth for our clients, delivering their alternative strategies into crypto accounts.”

Headquartered in Bermuda, Jackson says that the sector needed an automated platform to enable asset managers to sell more product and a wider variety of fund strategies, with an accelerated time to market, and a low turnkey cost.   This they have built, he says, within the Issuance.Swiss AG platform, working with Xetra on the Deutsche Borse and the SIX Exchange. 

Jackson explains that he and his colleague on the Issuance board, Laurent Kssis of CEC Capital, made a call late last year that fees were going to compress for Digital Exchange Traded Funds and Products. “We correctly predicted that when the SEC approved the spot bitcoin ETFs, fee compression would be an instant race to zero,” he says.

“In addition to managing costs and time-to-market, it is critical to structure these funds correctly.   As the issuer/manager of an ETP or ETF, the asset manager must consolidate the invested assets on their balance sheet, which can be a challenge for some organisations, when it comes to crypto assets.  Apex Group transfers this role to Issuance.Swiss, enabling asset managers and distributors to sell crypto strategies to their clients without the impacts of consolidation,” Jackson explains.

“Our client manages the product. Our distributor sells it, and neither of these entities has to consolidate the crypto assets on their balance sheet.”

March will see three large launches on the platform, with Figment offering two staking funds, for Ethereum and Solana, and Cardano launching an Ethereum strategy featuring downside protection using derivatives.

Issuance.Swiss AG previously worked with the Crypto Finance Asset Management, a subsidiary of Deutsche Borse, with their fund launches.   

Jackson adds that what Apex brings to the offering is the depth and breadth of its corporate and administration services. “We can do this quickly, in six weeks, and inexpensively,” he says. “We have negotiated a series of relationships, and compressed the fee structure, so that our clients, the asset managers, and distributors, could issue a new fund with as little as USD10 million AUM, and still make money. We structured this to enable testing a new market idea and remain in the black.”

“We knew we could compete with US entities pushing passive ETFs, as our clients tend to focus on specific managed strategies, for specific client segments.”

Issuance.Swiss plans another 15 new issues, over the course of the next two to three months. 

If there is another crypto winter, Jackson believes that while the demand will change, there will be no shortage of managers who can create product that protects in down markets.