Pile of cryptocurrency coins
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This year is shaping up to be the year of the ubiquitous adoption of crypto assets by financial services companies and their retail investors, according to KPMG in Canada.

“Retail investor interest in crypto assets started with early adopters years ago, and since then, we’ve seen a steady wave of institutional interest in the space – from pension funds and insurers to hedge funds and family offices – with almost one-third telling us they have direct or indirect exposure to the asset class,” said Kareem Sadek, partner, crypto assets and blockchain leader at KPMG in Canada, in a Wednesday press release.

Over the past couple of years, financial services companies – such as Purpose Investments, Fidelity Investments, Mackenzie Investments and CI Financial Corp. – have merged crypto asset-related services into their existing lines of business, by issuing ETFs, offering wealth management advice, custody, fund administration, compliance, clearing and market making.

Sadek was referencing a survey conducted last fall by KPMG in Canada and the Canadian Association of Alternative Strategies and Assets (CAASA).

Among the 75 responses received from KPMG clients and CAASA members as part of the survey, 32% of institutional investor respondents noted they had either direct or indirect exposure to crypto assets.

In terms of types of crypto assets: 50% stated they had exposure through ETFs, close-ended trusts or other regulated products; 36% said they had exposure to crypto-related public equities; 29% said they owned crypto assets directly; and 29% said they invested as a limited partner in a venture capital or hedge fund.

Among the institutional investor respondents, 57% reported initially investing in crypto assets between 2020 and 2021. However, most investments were quite small, with 71% of respondents allocating less than 2% of their portfolio to the asset class.

When it came to financial services’ respondents, 39% noted they offer crypto asset services, with 42% offering wealth management or financial advice in the space. Further, 33% stated they offer custody, clearing or settlement services; 22% are issuing ETFs or other regulated products, and 11% stated they’re providing liquidity for regulated products as a market maker.

“Institutional investors are increasingly adding exposure to crypto assets to further diversify their portfolios given the reduced ability of government bonds to act as portfolio shock absorbers,” said Chris Farkas, partner, national financial services consulting leader for asset management, KPMG in Canada, in the release. “While this is a newer and potentially promising space for institutional investors, they’re clearly taking a prudent approach.”

In a supplementary poll by KPMG in Canada of more than 1,000 Canadians, 13% of respondents said they have bought either Bitcoin or Ethereum directly, while 11% have bought Bitcoin ETFs or other crypto-asset funds.

Canadians ages 18 to 24 were most likely to engage in the space, as 24% of respondents in that cohort stated they bought crypto assets like Bitcoin or Ethereum, directly. Further, 20% of respondents in that age bracket bought Bitcoin ETFs or other crypto asset funds.

Respondents in the 55-64 age bracket were least likely to buy cryptocurrencies and crypto funds.

However, the poll also found that there is some degree of interest among the different age groups of Canadians. On the lower end, 10% of Canadians ages 55 to 64 said they were interested in buying cryptocurrencies, and 15% said they were intrigued by the idea of buying crypto asset funds.

The poll was conducted between Feb. 14 and Feb. 16 on Schlesinger Group’s Asking Canadians panel via the Methodify online research platform. The KPMG in Canada and CAASA survey was conducted between Aug. 30 and Oct. 31, 2021.