Worries over asset custody are the biggest deterrent for institutional investors and wealth managers sceptical about the crypto and digital assets sector, according to new global research by London-based Nickel Digital Asset Management.
Nickel’s study with institutional investors and wealth managers in the US, UK, Germany, Switzerland, Singapore, Brazil and the United Arab Emirates, who collectively manage over USD800 billion in assets, found custody is a bigger issue than volatility.
They were asked to rank six barriers to investing in digital assets and rated the lack of a centralised authority as the third biggest barrier followed by ESG issues and the risk of market manipulation. Uncertainty over the regulatory environment was rated sixth and least important.
Almost all (97 per cent) questioned say the backing of a major traditional financial institution is important before they consider investing in any digital asset fund or investment vehicle. For 44 per cent it is very important, the study found.
Recent volatility is also helping encourage sceptics to invest – the research found nearly one in five (19 per cent) strongly agree that price dislocations have presented strong opportunities to invest for the first time or increase allocations with another 76 per cent slightly agreeing.
Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, says: “The industry has achieved significant progress in mitigating custody and counterparty risks through the adoption of off-exchange settlement solutions (an advanced form of digital asset custody) over the past couple of years, however, this knowledge appears to be limited outside of the ‘digital native’ community.”
“Close involvement and broad support by large traditional financial institutions is clearly an important factor for many investors, which makes increased involvement of BlackRock and Fidelity a very welcomed move.”
