Survey: Crypto security is a greater concern for institutional investors than volatility

  • The recent survey by Nickel Digital shows big market players find lack of secure crypto custodial solutions to participate in crypto.
  • More regulatory clarity in 2022 is likely to push more institutional players towards crypto adoption.

2021 was the year when the crypto market rallied to record levels amid growing participation from institutional players. As per the latest CoinShares report, institutional inflows in crypto for 2021 stood at a record $9.3 billion.

However, the latest survey conducted by European regulated digital asset hedge fund manager Nickel Digital Asset Management finds that institutional players aren’t participating to the extent that they can! The report cites security concerns to be one of the key issues holding them back from greater crypto participation.

In fact, the security concerns hold greater weightage for these institutional players, over and above price volatility. The survey was conducted by talking to institutional investors and wealth managers from the US, UK, Germany, France and UAE.

The 100 interviewees who participated in the survey collectively manage more than 108.4 billion USD worth of assets. Of them, 79 percent of them consider crypto asset custody as a key factor while making investments. When Nickel Digital conducted its previous survey back in July 2021, this number was 76 percent.

This could be possibly related to the increase in the number of crypto crimes over the last year. As per blockchain analytics platform Chainalysis, crypto crimes reached a record high during the last year of 2021. In absolute numbers, the value received by such illicit addresses surged to a record $14.03 billion.

The regulatory landscape for crypto

In the Nickel Digital survey, the interviewees also noted other key reasons for not investing aggressively in crypto. The report mentions:

This (security concern) was followed by 67% who said price volatility, 56% who cited market cap, and 49% who said the regulatory environment. Further 12% included the carbon footprint from Bitcoin and other cryptocurrencies in their top three reasons for not investing.

In its previous survey conducted July 2021, the concerns around regulatory matters stood at 71 percent. This has considerably dropped to under 50 percent now.

Furthermore, more than 75 percent of the interviewees believed that the U.S. Securities and Exchange Commission (SEC) will get more power in overseeing digital assets in 2022. A staggering 73 percent of these believe that it will have an overall positive impact on the crypto market.

Last year, SEC Chairman Gary Gensler asked the U.S. Congress to grant more power to the securities regulator in overseeing the crypto market. “We have a role as a nation to protect those investors against fraud,” he said.

Apart from this, even big industry players also believe that regulation will be key to driving further institutional adoption. Sam Bankman-Fried, founder of crypto exchange FTX recently spoke on similar lines. He thinks that as more regulatory clarity emerges, more and more institutions will participate. Additionally, crypto will serve as the right hedge amid the ongoing fears of rising inflation.

About Author

Bhushan is a FinTech enthusiast and holds a good flair for understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In his free time, he reads thriller fictions novels and sometimes explores his culinary skills.

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