How Institutional Adoption is Changing the Future Digital Assets

The digital asset industry has been battling negative press for a while, but the trend for major financial institutions to provide their clients with access to digital asset investments continues. According to a recent report by Coinbase, over 52% of Fortune 500 companies have invested in crypto, blockchain or web3 initiatives. Binance’s Institutional Crypto Outlook survey also backs the rise of institutional interest in crypto, with over 60% of Institutional Investors expressing positive outlooks towards crypto.

For example, asset management giants like BlackRock, WisdomTree, and Invesco have filed applications for Bitcoin ETFs with the SEC, and HSBC in Hong Kong has announced this month that they plan to offer its clients access to cryptocurrency-linked investment products. The filing of ETFs have played a role in restoring confidence in the Bitcoin and other cryptocurrency markets, following a string of meltdowns, including the sudden collapse late last year of exchange FTX, which authorities allege was running a multi-billion dollar fraud fraud.

The first Bitcoin ETF proposal was submitted in 2013, but it was rejected by the SEC in 2017. Since then, multiple proposals have been submitted, but all have been rejected due to concerns around market manipulation and lack of regulation in the cryptocurrency market. However, in late 2021, the SEC approved two Bitcoin ETFs. And just last month, the SEC approved the 2x Bitcoin Strategy ETF (BITX) from Volatility Shares and the First Leveraged Bitcoin Futures ETF.

The growth of institutional adoption is clear from the fact that digital asset ETFs listed in Hong Kong have already surpassed $12bn HKD (us$1.53bn) in assets under management, with total AUM growing by 80% compared to December 2022. The Hong Kong government has also announced its intention to position the city as a Web3 hub, with a task force exploring the potential of blockchain and decentralized finance (DeFi) in the financial sector. Appointing candidates including Yat Siu, co-founder and executive chairman of Animoca Brands, a home-grown Web3 brand to support the movement.

Institutional interest in the space can also be validated via the surge in VC funding and investment in the crypto sector, which has reached over $1.11 billion by end of May 2023. Web3 has been leading the funding race, with over 170 million raised.

At OAX Foundation, we believe these developments could mark a significant step in the push for a regulated and accessible way for investors to gain exposure to digital assets, which is a crucial step towards wider adoption and acceptance. While digital asset ETFs predominately appeal to institutional investors, many retail investors still prefer to directly manage their digital currencies in a decentralized manner. To make it more accessible for these users, the OAX Foundation has backed the Notifs app, a digital asset portfolio tracking app that provides investors with a bird’s eye view of their digital tokens on and off chain. The app is a useful tool for both new and experienced investors in the digital asset space. We are excited to be part of this journey to develop and implement solutions that play a role in this movement towards wider adoption and acceptance of digital assets.