39% of Canadian institutional investors have exposure to crypto: KPMG

Canadian-based institutional investors have significantly increased their crypto exposure compared to the last bull run last year, according to a survey by accounting firm KPMG.

Nearly 40% of institutional investors report direct or indirect exposure to crypto assets by 2023 — up from 31% in KPMG's 2021 survey, the company reported on April 24.

KPMG received 65 responses, of which 31 were institutional investors managing more than $500 million in assets, and the remaining 34 were financial services firms.

The survey found that a third of institutional investors have allocated 10% or more of their portfolios to crypto assets – up from a fifth two years ago.

Kunal Bhasin, partner and leader of KPMG Canada's digital assets practice, said that firms are looking to invest in alternative asset classes such as hedges and safe-haven assets amid rising inflation and rising debt in the US.

Most investors cited the maturing market and improved security infrastructure as the key reasons behind investing in crypto assets, and increased customer demand for crypto asset services was cited as a key reason for financial companies to expand their offerings.

The world's first approval of Canada's spot bitcoin and ethereum exchange-traded funds (ETFs) in February 2021 has helped domestic investors become “increasingly attracted” to the asset class, said Kareem Sadek, another executive in KPMG's digital assets practice.

But the recent approval of spot Bitcoin ETFs in the United States marks a “critical moment” for many market participants in Canada, Sadek added.

Related: KPMG Adds BTC and ETH to Treasury in Canada

The report found that half of institutional investors surveyed have exposure to crypto assets in Canadian ETFs, closed-end trusts or other regulated products, while 58% said their exposure through the stock market – such as Galaxy Digital on the Toronto Stock Exchange – will increase from 36% in 2021.

More institutional investors are also gaining exposure to derivatives markets – at 42% now compared to 14% in 2021.

The only decline came from venture capital or hedge fund firms, dropping from 29% to 25% by 2021.

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