Crypto security is biggest concern for institutional investors

[LONDON] Security concern, more so than the volatility and regulations, is what holds institutional investors back from investing in crypto and digital assets, a survey by Europe's largest regulated digital-asset hedge fund manager showed.

The survey of institutional investors and wealth managers, who collectively manage around US$108.4 billion, showed 79 per cent see asset custody as the key consideration whether to invest in this space.

Custodians provide solutions for investors who want to securely store and protect their crypto assets. The report was commissioned by Nickel Digital Asset Management, and involved interviews with 50 wealth managers and 50 institutional investors across the US, the UK, Germany, France and the United Arab Emirates.

"This was followed by 67 per cent who said price volatility, 56 per cent who cited market cap, and 49 per cent who said the regulatory environment," the report said. "Further 12 per cent included the carbon footprint from Bitcoin and other cryptocurrencies in their top 3 reasons for not investing."

Respondents are also optimistic about the prospect of the US Securities and Exchange Commission (SEC) being empowered with more authority to regulate these assets.

Gary Gensler, the chair of the SEC has called on Congress to provide the agency with more authority to police cryptocurrency trading, lending, and platforms. Among those interviewed, 76 per cent, expect this will be granted next this year.

"If the SEC is granted these extra powers, 73 per cent of institutional investors and wealth managers believe this will have a positive impact on the price of crypto and digital assets and 32 per cent believe it will have a very positive effect," the report said.

BLOOMBERG