Investment Surge in Cryptocurrencies Among Canadian Institutional Investors in 2023
According to a recent study conducted by KPMG, institutional investors in Canada significantly increased their exposure to cryptocurrencies in 2023 compared to the previous bull market cycle. The report, “Institutional Adoption of Cryptoassets,” gathered responses from 65 participants, including 31 institutional investors managing assets worth over $500 million and 34 financial services organizations.
Key Findings from the Survey
- 39% of institutional investors reported having direct or indirect exposure to crypto assets in 2023.
- This marks a notable increase from 31% in the firm’s 2021 study.
- Half of the financial services respondents stated that they offered crypto asset services in 2023, up from 41% in 2021.
- One-third of institutional investors had allocated 10% or more of their portfolios to crypto assets, an increase from a fifth reported two years ago.
Rising Interest in Crypto Assets
One of the primary driving factors behind the surge in institutional interest in cryptocurrencies is the market maturation and the enhancement of custody infrastructure. Financial firms have cited increased client demand for crypto assets services as a significant factor propelling their expansion into this space.
Canada’s Emergence as a Crypto Hub
Many crypto companies chose to relocate a significant portion of their operations to Canada last year due to the strict regulatory environment in the United States. Notably, Coinbase expanded its presence to the Canadian West Coast, citing Canada’s “regulation by engagement” approach as a key factor.
Role of ETFs in Attracting Investors
The approval of spot Bitcoin and Ethereum exchange-traded funds (ETFs) in Canada in February 2021 played a crucial role in attracting local investors to the crypto asset class. The recent approval of spot Bitcoin ETFs in the United States was deemed a significant milestone for many market participants in Canada.
Investment Vehicles in the Crypto Space
- Half of the institutional investors surveyed have exposure to crypto assets through Canadian ETFs, close-ended trusts, or other regulated products.
- 58% have exposure through the stock market, such as Galaxy Digital on the Toronto Stock Exchange, showing an increase from 36% in 2021.
- More institutional investors are gaining exposure through derivatives markets, which now stand at 42% compared to 14% in 2021.
- However, there was a decline in exposure through venture capital or hedge fund firms, dropping to 25% from 29% in 2021.
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