(Kitco News) - BNY Mellon, the world’s largest custody bank, has released the results of a recent survey it commissioned that asked 271 institutional investors from around the world about their adoption of digital assets, including their priorities, challenges faced, and the opportunities that lay ahead.
The study found that for institutional investors, issues like trust, asset safety, regulatory clarity and institutional-grade services “are critical for sustained adoption of digital assets.” They also value “integrated services for digital and traditional assets, across the investment lifecycle,” according to the report.
Seventy percent of the institutions surveyed indicated that they would increase their digital asset activity if services like custody and execution were available from recognized, trusted institutions. 88% signaled that they are moving forward with their previously determined plans despite the market downturn.
The vast majority (91%) of institutional investors are interested in investing in tokenized products but are looking to do so in a safe and compliant manner. A majority of respondents (88%) also indicated that they are comfortable with the digital representation of cash, also known as stablecoins.
Nearly 97% indicated that tokenization would “revolutionize asset management” and “be good for the industry,” highlighting such improvements as faster settlement times, increased liquidity, and increased accessibility for all investors to asset classes like private equity funds and real estate.
The main concern highlighted by 72% of respondents was that they would like an “integrated provider for all digital asset needs.” A lack of regulatory clarity in the blockchain and digital asset space was cited as a concern by 43% of participants.
A majority of respondents (69%) suggested that they would only be comfortable trading digital assets with a “traditional financial institution” that is known to be well-capitalized and unlikely to run into liquidity similar to what led to the downfall of Terra/Luna and Three Arrows Capital. Nearly one in five (19%) indicated that their compliance teams would not even approve of a crypto-native service provider.
This implies that while the interest in digital assets is high among institutional investors, many are not comfortable using a blockchain-native service provider due to the lack of regulatory clarity around their operations.
“Institutional Investors expect to mix both traditional and digital assets in their portfolio and have a strong preference for fully integrated providers across all their digital asset needs,” the report said.
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BNY’s launch of digital asset custody services earlier in October was likely influenced by this finding, as the bank is looking to provide centralized and regulated services for digital assets that institutional investors can feel comfortable utilizing.
“Digital assets are here to stay,” said Michael Demissie, the head of the digital assets unit and advanced solutions at BNY Mellon. “At BNY, we see cryptocurrencies as the tip of the spear and recognize the opportunity this technology offers, extending to and beyond tokenized assets and digital cash.”
“We are in the early, yet formative, days of digital asset evolution. As with every other financial innovation, trust is essential,” he added.
