KPMG Study Shows 39% of Canadian Institutional Investors Embrace Crypto Investments

Jimmy Aki
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KPMG had on April 24 published its survey report, which showed that cryptocurrency exposure among Canadian institutional investors increased in 2023. This was a significant rise compared to the last bull run of 2021.

Canadian Institutional Investors’ Increased Interest in Crypto Assets Driven By Regulatory Developments

According to the report, about 39% of institutional investors reportedly have direct or indirect exposure to crypto assets, 8% higher than KPMG’s 2021 survey.

The survey received 65 responses, which included 31 institutional investors, with most managing more than $500 million in assets and 34 financial services organizations.

It was also revealed that one-third of Canadian institutional investors have set aside 10% or more of their portfolios to crypto assets, which used to be a 5% allocation two years ago.

This trend indicates a growing demand amongst Canadians to seek alternative asset classes to hedge against inflation and provide security from the United States’ increasing debt.

Canadian Institutional Investors

Kunal Bhasin, a partner and leader at KPMG Canada’s Digital Assets practice, confirmed that firms are apparently seeking to invest in alternative asset classes like cryptocurrencies as a hedge and a reliable store of value amid increasing inflation and rising debt.

Meanwhile, many financial firms have pointed to client’s demand for crypto asset services as the driving force behind the rise in crypto investments.

However, Kareem Sadek, another executive at KPMG’s Digital Assets practice, noted that Canada’s approval of spot Bitcoin and Ethereum exchange-traded funds (ETFs) in February 2021 is a major driver in helping local investors become “increasingly attracted” to the asset class.

Additionally, the recent approval of spot Bitcoin ETFs in the United States was described as a “milestone moment” for many market participants in Canada, which has further fueled interest in crypto holding.

The report also found that half of the institutional investors surveyed have crypto-asset exposure through Canadian ETFs, close-ended trusts, or other regulated products.

Furthermore, 58% have exposure through the stock market, such as Galaxy Digital on the Toronto Stock Exchange, up from 36% in 2021.

More institutional investors are also gaining exposure through derivatives markets that increased from 14% in 2021 to 42% in 2023.

The only decline from the survey was observed in venture capital or hedge fund firms, falling from 29% as reported in 2021 to 25%.

Comparing Crypto Adoption in Canada and the United States

While the KPMG survey shows the growing crypto exposure among Canadian institutional investors, trends have compared the crypto adoption rate in Canada to the United States.

Some perspectives were shared during an August 2023 NASDAQ conversation with Mark Greenberg, Managing Director for Canada at Kraken.

According to Greenberg, Canadians are known to be a bit more risk-averse investors than their American counterparts, which have led to a slower adoption of cryptocurrencies in Canada.

However, recent developments have spurred their interest in the digital asset space, with more Canadians actively purchasing cryptocurrencies, even as experts have called for more investments in crypto assets like Bitcoin.

He attributed this rise in crypto adoption to Canada’s clear regulatory frameworks, which include registration guidelines and KYC rules for crypto-trading platforms.

Regulatory bodies such as FINTRAC (The Financial Transactions & Reports Analysis Centre of Canada) and The CSA (Canadian Securities Administrators) have played a crucial role in increasing Canadian clients’ confidence in entering the digital asset market.

Looking ahead, Greenberg remains bullish on the prospects of crypto adoption in Canada, particularly given the high proportion of people underserved by the existing traditional financial system.

He believes that more Canadians are seeking greater control over their financial assets, with the ability to withdraw them on demand – a factor that has contributed to 39% of Canadians believing that cryptocurrencies will play a key role in financial services in the future.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.