Canadian institutional investors back on the crypto train, finds KPMG report

29 April 2024 3 min. read

Nearly four in 10 institutional investors in Canada had exposure to cryptoassets last year, according to a biannual survey from KPMG Canada and the Canadian Association of Alternative Strategies & Assets (CAASA). The report surveyed 31 institutional investors and 34 financial services organizations.

Thirty-nine percent of investors reported direct or indirect exposure to crypto in 2023, up from 31% in 2021.

Meanwhile, half of financial services firms (50%) said they were offering at least one type of crypto product or service, up from 41% in 2021.

“The last time we did this survey in 2021, it was a strong year for cryptoassets. The following year was a turbulent year, marked by fraud and collapses of major cryptoasset trading firms, but those events had a cleansing effect on the industry,” said Kunal Bhasin, partner and co-leader of KPMG Canada’s digital assets practice.

“Rising U.S. debt combined with increasing inflation likely provided a catalyst for the crypto rally of 2023, and it appears investors are looking for alternative asset classes that act as a debasement hedge and a reliable store of value. Our survey findings suggest cryptoassets are increasingly seen as an investible alternative asset class among such institutional investors and financial services organizations in Canada,” Bhasin added.

Canadian institutional investors back on the crypto train, finds KPMG report

Of the 39% of institutional investors with exposure to crypto, 75% owned cryptoassets directly, up from 29% in 2021. Of the crypto owners, a third said they allocated 10% or more of their portfolios to cryptoassets, up from a fifth two years ago.

Sixty-seven percent of investors cited a maturing market and custody infrastructure as key reasons for their investment in crypto, up from 14% in 2021. More than half (58%) also cited strong market performance – up from 21% in 2021.

Bitcoin prices rallied 150% in 2023, and are up 50% so far in 2024.

“A pivotal moment for cryptoassets came in January 2024, when the US Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs. That was considered a milestone event for many market participants. That attracted many traditional asset managers with strong reputations to the cryptoasset industry,” said Kareem Sadek, emerging technology risk leader and co-leader of KPMG’s digital assets practice.

An Ethereum ETF is also expected to be approved in 2024.

Of the half of financial services firms offering crypto products/services, the most popular ones were crypto trading (52%); custody, clearing or settlement services (48%); and quantitative trading (38%).

Less popular offerings included ETFs or regulated products (24%) and financial advice (14%).

Client demand is a significant driver for the offerings, with eight in ten financial services firms saying it’s a major factor in expanding crypto services, up from half in 2021.

“Traditional financial institutions are increasingly recognizing the need to provide cryptoasset services to meet customer demand. Even so, Canada’s large financial institutions will need to become more comfortable with the unique challenges related to anti-money laundering and financial crimes that are posed by cryptoassets before they offer more commercial banking services to crypto companies,” Sadek said.