Institutional interest in cryptocurrencies increases in Canada, with 39% exposure. A KPMG survey reveals that 50% of financial services already offer cryptoasset services. Factors driving growth include rising US debt, dollar inflation and regulatory clarity.
Canadian institutional investors have shown increasing interest in cryptocurrencies, with 39% direct or indirect exposure to crypto assets, a notable increase from 31% in 2021.
A recent survey by KPMG in Canada and CAASA revealed strong adoption of cryptoassets among financial organizations and institutional investors following a year of recovery and regulatory advancements.
KPMG received 65 responses, of which 31 identified themselves as institutional investors, the majority of which manage more than $500 million in assets, while the remaining 34 were financial services organizations.
According to KPMG, Cryptocurrencies Win Against Inflation in Canada
The survey, which collects information from Canadian financial services and institutional investors, indicates that 50% of financial services respondents offered cryptoasset services in 2023, up 9% from the previous year. The recovery of the crypto market, greater regulatory clarity and innovations in digital assets contribute to growth.
Co-head of KPMG’s Digital Assets practice, Kunal Bhasin, highlighted that cryptoassets are increasingly considered investable alternative assets. Bhasin attributes this boom to rising US debt and dollar inflation, which has led investors to seek out crypto assets as a hedge and stable store of value:
“The last time we did this survey in 2021, it was a strong year for crypto assets. The following year was a turbulent year, marked by fraud and collapses of major crypto asset trading firms, but those events had a cleansing effect on the industry.”
The report found that half of institutional investors surveyed have exposure to crypto assets through Canadian ETFs, closed-end funds or other regulated products, while 58% have exposure through the stock market, such as Galaxy Digital on the Toronto Stock Exchange, an increase from 36% in 2021.
More institutional investors are also gaining exposure through derivatives markets — now at 42% compared to 14% in 2021.
The only drop came from venture capital firms or hedge funds, which declined to 25% from 29% in 2021.
Other conclusions highlight that 75% of institutional investors hold crypto assets directly, and 50% were exposed through funds traded on exchanges or regulated products. Exposure to cryptocurrency-related public equities increased, with 58% of investors venturing into this type of asset.
Improving market infrastructure and strong performance metrics fueled the significant rally in cryptocurrency investments. Bitcoin, for example, rose 150% in 2023 and continues its rise in 2024.
Canadian Institutional Investors Have an Appetite for Cryptocurrencies
The SEC’s approval of spot Bitcoin ETFs marked a turning point, attracting traditional asset managers to the crypto industry in anticipation of the approval of an Ethereum ETF. Kareem Sadek, Head of Emerging Technologies Risk and Co-Head of KPMG’s Digital Assets Practice, said:
“A pivotal moment for cryptoassets came in January 2024, when the US Securities and Exchange Commission (SEC) approved Bitcoin spot ETFs. This was considered a milestone for many market participants. “This attracted many traditional asset managers with strong reputations to the crypto asset sector.”
Therefore, as the Canadian market shows an appetite for cryptocurrencies, experts like Bhasin advise financial institutions and investors interested in increasing their exposure to cryptocurrencies to educate themselves in the sector, develop a strategic vision and implement sound policies to navigate this evolving landscape.
By Audy Castaneda
