BNY Mellon gives institutional investors a crypto survey

How are institutional investors currently investing in and strategizing around digital assets and blockchain technology? Recently, BNY Mellon surveyed over 270 institutional investors and asked them questions about digital assets to find out what investor appetite is, what approaches they are currently taking in the digital asset market, what their fears are when it comes to digital currency, and more.

Here are the key takeaways from BNY Mellon’s 40-page report, “Institutional Investing 2.0: Migration to digital Assets Accelerates.”

What investors are afraid of

The BNY survey found that 76% of institutional investors surveyed are either “exploring” digital assets or already have a direct allocation to digital assets. However, many of the investors who reported said that there are still several pain points when it comes to the digital asset market; 43% of institutional investors stated that because there is a lack of regulatory clarity in blockchain and digital assets, they would only be comfortable trading digital assets with a “traditional financial institution” that they know is well capitalized and unlikely to encounter. liquidity problems leading to disasters such as the fall of Terra Luna and Three Arrows Capital.

On top of that, 19% of respondents said their compliance team would not approve a crypto-native service provider.

In other words, institutional investors are very interested in digital assets, but in many cases they are not comfortable using a blockchain-native service provider due to the lack of regulatory clarity around their business. What institutional players are looking for and waiting for are traditional financial institutions to integrate blockchain/digital asset services into their current business so that they can give their business to an entity that is regulated and has a track record of trust and success in terms of assets, money and the activities that surround both.

The data BNY Mellon collected from the survey may have been a catalyst in the bank’s decision to launch a digital asset custodian service to cater to the institutional investor audience interested in allocating to digital assets but having trouble doing so through the decentralized service providers that offer the solutions they are looking for.

What are investors looking forward to:

About 97% of respondents believed that tokenization would revolutionize asset management” and “be good for the industry.” Respondents argued that some of the biggest benefits of tokenization in money markets would be faster settlement times, increased liquidity, and increased accessibility for all investors to asset classes such as private equity funds and property.

Interest by location:

It is important to note that institutional investors’ interest in digital assets varies from place to place. The survey found that 75% of respondents in Hong Kong and Singapore were currently invested in or exploring digital assets, followed by 60% of respondents in Brazil, 53% in the UK, 49% in the US and 48% in Europe.

The report mentions several factors that explain this geographical difference. In Hong Kong and Singapore, digital assets are regulated by the Securities and Futures Commission (SFC) and the Monetary Authority of Singapore (MAS). In addition, Hong Kong and Singapore were the first to adopt blockchain trends such as ICOs, showing that they are not afraid to allocate and explore new technologies and investment opportunities.

In other areas of the world, digital assets remain in a regulatory gray zone with increasing regulatory scrutiny and law enforcement taking place around blockchain-native entities, projects and teams, causing citizens and residents to proceed with caution or watch from the sidelines because they are Not sure what is legal and what is not.

What investors are looking for

It was a central theme throughout the BNY Mellon survey, institutional investors are very interested in digital assets, but “key conditions” must be met before they turn their research into actual investment in the space. Among these conditions are regulatory clarity and an increased number of globally trusted service providers that are regulated and have a track record.

“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.

This may be yet another reason why BNY Mellon recently added digital asset custody (holding and transferring BTC and ETH) to its service offerings. Institutions have an appetite for digital assets, and customer demand is forcing them to enter the digital asset space. However, institutional entities want to work with trusted players in the financial world rather than startups or decentralized service providers. In this regard, it is much easier for a “traditional” financial institution to add support for digital assets than for a “decentralized” financial institution or service provider to add support for traditional financial instruments.

BNY Mellon’s digital asset custody product is just the beginning of BNY Mellon’s digital asset-related service offering, said a person familiar with the matter. This means that BNY Mellon and other established financial services are likely to start making their institutions into one-stop shops where clients can meet their requirements for equity, commodities and digital assets in one place.

“Digital assets are here to stay,” said Michael Demissie, head of the digital assets and advanced solutions unit at BNY Mellon.

“We are on a journey towards a future where blockchain and related capabilities will transform the financial services landscape … At BNY Mellon, we see cryptocurrencies as the tip of the spear and recognize the opportunity this technology offers, extending to and beyond tokenized assets and digital money . We are in the early but formative days of digital asset development. As with any financial innovation, trust is important,” he added.

See: BSV Global Blockchain Convention panel, Re-Inventing Business with Blockchain

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