Depressed Crypto Markets, Regulatory Risks Fail to Dissuade Asset Managers From Investing

Almost half the 60 buy-side professionals surveyed from U.S. and European-based asset managers and hedge funds said they're actively managing digital assets.

AccessTimeIconSep 7, 2023 at 7:54 a.m. UTC
Updated Sep 7, 2023 at 3:27 p.m. UTC

The hazy regulatory environment and depressed crypto markets are doing little to curb asset managers' interest in digital assets, according to report released Wednesday by Coalition Greenwich, a unit of India-based credit rating company Crisil, and Amberdata, a crypto data provider.

Almost half the 60 buy-side professionals from U.S. and European-based asset managers and hedge funds surveyed between May and June are actively managing digital assets, according to the report, Digital Assets: Managers Fuel Data Infrastructure Needs.

Most of the managers see the digital assets industry growing in the next five years in terms of assets under management, with over 40% estimating a compound annual growth rate of at least 11%, and about a fifth forecasting 20% or more.

Some asset managers expect a five-year CAGR of over 20%. (Coalition Greenwich, Amberdata)
Some asset managers expect a five-year CAGR of over 20%. (Coalition Greenwich, Amberdata) (Coalition Greenwich, Amberdata)

A quarter of the firms already have a specific digital assets strategy, and another 13% are looking to unveil one over the next two years.

Overall, asset managers are optimistic about the growth opportunities in the digital assets industry and commercial opportunities to offer products like exchange-traded funds (ETFs) and tokenized securities.

Summary of the findings (Coalition Greenwich, Amberdata)
Summary of the findings (Coalition Greenwich, Amberdata) (Coalition Greenwich, Amberdata)

Asset managers remain optimistic about the U.S. as a crypto destination and expect American regulators to eventually provide a prudent regulatory framework for the industry. That's surprising, the report said, considering the Securities and Exchange Commission's (SEC) enforcement actions against leading crypto exchanges Binance and Coinbase.

Perhaps equally surprising is that most managers expect centralized exchanges to grow over the next five years. Since the collapse of Sam Bankman-Fried's crypto exchange FTX in November last year, investors have increasingly preferred to take direct custody of their coins, choosing to hold them off centralized exchanges.

The report also said the industry is still evolving, and managers are bullish on the most obvious use cases like crypto portfolios, investment products, and tokenization of financial instruments.

Edited by Sheldon Reback.


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.