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

KPMG Canada partner Kunal Bhasin says rising debt and increasing inflation have likely attracted institutional investors into crypto.

Canada-based institutional investors significantly increased their crypto exposure last year compared to the last bull run, a survey from accounting firm KPMG has revealed.

Nearly 40% of institutional investors reported having direct or indirect exposure to crypto assets in 2023 — up from31% in KPMGs 2021 study, the company according to an April 24 report.

Source: KPMG

KPMG received 65 responses, 31 of which identified as institutional investors with most managing more than $500 million in assets, while the remaining 34 were financial services organizations.

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

Kunal Bhasin, a partner and leader at KPMG Canadas Digital Assets practice said it “appears” the firms are looking to invest in alternative asset classes that act as a debasement hedge and a reliable store of value in the face of increasing inflation and rising debt in the United States.

A large majority of investors cited a maturing market and improved custody infrastructure as key reasons behind investing in crypto assets while increased client demand for crypto asset services was cited as a key factor for financial firms expanding their offerings.

Canada‘s world-first approval of spot Bitcoin and Ethereum exchange-traded funds (ETFs) in February 2021 helped local investors become “increasingly attracted” to the asset class, noted Kareem Sadek, another executive at KPMG’s Digital Assets practice.

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

The report found that half of the institutional investors surveyed have crypto asset exposure through Canadian ETFs, close-ended trusts or other regulated products, while 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 receiving exposure through derivatives markets — now at 42% compared to 2021s 14%.

The only fall came from venture capital or hedge fund firms, falling to 25% from 2021s 29%.