Institutional investors continue to embrace the crypto ecosystem despite the cryptocurrency prices tumbling over 50% in the past ten months. Upon tapping fresh all-time highs in November, Bitcoin, Ethereum, and other cryptocurrencies pulled back sharply, with the Terra-induced stablecoin de-peg crash in May plunging prices further and stirring a global regulatory debate.
So far, a lot has been going on in the crypto sector, with officials worldwide trying to fast-track regulations for the nascent industry. In the US, the crypto community has been exchanging notes on a March executive order by president Biden to regulate cryptocurrencies in the US. The European Union has also been working around MiCa after adopting a provisional rulebook to police crypto early this year.
This has painted a positive picture of the crypto sector, especially for global asset managers who prefer legal certainty. Although jurisdictions such as Australia continue to view crypto assets as too risky, a significant number of institutional investors are betting big on the sector.
According to banking behemoth State Street, despite the ongoing crypto winter, traditional players “are banking on the asset class to stick around” as they prepare to roll out a barrage of crypto products and digital assets.
“During the course of the June, July period where things were really hotting up in terms of activity, we saw institutional clients not necessarily double down, but they weren’t really deterred from placing strategic bets on the asset class itself,” Irfan Ahmad, a digital lead at State Street Digital said, citing a Monday report by The Sydney Morning Herald. “The takeaway from that is, I think there is a belief that the asset class is here to stay. And we, as an asset servicer, will obviously partner with our clients where they believe their ambition lies.”
According to Ahmad, the outfit’s institutional clients have been keen on crypto and digital assets investments compelling it to consider rolling out products that will help them access some of those assets.
State Street, the world’s second-largest custodian bank with over $23trillion in AUM, has been working with asset management firms to develop tailor-made crypto products for clients. In March, the top bank partnered with Copper.co, a London-based provider of institutional digital asset custody and trading infrastructure, to help launch an institutional-grade digital asset custody product.
Banking giant Goldman Sachs has also expressed interest in the crypto sector, launching its maiden Bitcoin-backed loan last month. Recently, BlackRock also launched a spot bitcoin trust for institutional clients in the US., signalling that other institutional players are likely to keep leaping into the crypto space.