Economist report: Institutional investors continue to increase their allocation to digital assets

The report, commissioned by OKX, shows that more and more institutional investors are researching new digital assets and planning to include them in their investment portfolios.

• Institutional investors continue to be bullish on digital assets, and in addition to holding cryptocurrencies, they also accept instruments such as staking and derivatives.

• While optimism continues, challenges remain for further adoption.

By 2027, institutional investors are expected to increase their allocation to digital assets in their portfolios to 7%. The market for tokenized assets is expected to exceed $10 trillion by 2030, indicating significant growth for the industry. However, this new report from The Economist, commissioned by OKX, points out that challenges remain.

Currently, asset managers allocate 1%-5% of their assets under management (AUM) to digital assets.

The report states: “Digital asset allocation in institutional portfolios has been focused on cryptocurrency trading, with Bitcoin and Ethereum being the main investment categories. Institutional investors have shown greater optimism towards digital assets attitude, thanks to the growing number of investment tools that are no longer limited to cryptocurrencies.”

The report stated that 51% of institutional investors are considering spot cryptocurrency allocations, and 33% of institutional investors. Considering staking digital assets, 32% of institutional investors are exploring cryptocurrency derivatives and 36% are considering tracking cryptocurrency funds.

In addition to holding cryptocurrencies, an increasing number of institutional investors are now considering investing in other digital assets such as staking, crypto derivatives, and tokenized bonds. Among them, the rise of digital assets in the market is particularly prominent, such as the 50 million pound (US$66 million) digital native bond issued by the European Investment Bank, the US$1 billion tokenized US Treasury bond, and the HK$6 billion (US$766.8 million) Hong Kong Digital currency bonds.

The report points out that custodians also play an important role in helping institutional investors accept digital assets. 80% of traditional and crypto hedge funds surveyed use custodians. In Asia, many crypto custodians are obtaining the same custodian licenses as their traditional financial counterparts, such as trust or company service providers (TCSPs) in Hong Kong. And in Singapore, the country’s Monetary Authority has created its own crypto custody framework.

However, some challenges remain, such as a lack of regulatory coordination.

The report pointed out: "The lack of uniformity in regulatory frameworks across different jurisdictions has created uncertainty, making it difficult for institutional investors to meet compliance requirements and manage risks associated with regulatory changes." The report also praised Europe's MiCA is an example of effective regional regulation.

The authors continued: "Differing approaches taken by different regions may lead to market instability and complicate institutions' integration of digital assets into investment portfolios."

The report also pointed out that liquidity dispersion is another concern for investors, as it can lead to market instability and make it difficult for institutions to effectively execute transactions in the digital asset space.

The report reads: "The fragmentation of liquidity across different blockchain networks and digital asset markets can lead to price inefficiencies and pose significant challenges to institutional investors handling large-scale transactions." 

Some people try to solve this problem using technologies such as native token transfers, which is considered an evolution.  

As CoinDesk previously reported, native token transfers enable seamless cross-chain movement of tokens while maintaining their unique properties and ownership, which is consistent with creating multiple non-fungible versions of wrapped assets. different.  

This report from OKX concludes with a recent Survey Similar conclusions, the survey found that 54% of Japanese institutional investors of investors plan to invest in cryptocurrencies within the next three years, with 25% of investors taking a positive view on digital assets and tending to allocate 2%-5% of AUM to these investments.