Crypto Emerges as ‘Debasement Hedge’ for Institutional Investors Says KPMG

Renowned accounting company KPMG releases data showing rising investor interest in cryptocurrencies as a safeguard against central banks devaluing fiat currencies.

Financial service providers have adopted cryptocurrency asset services at a notable rate of growth, according to a new KPMG analysis on the Canadian sector. According to the report, this represents a significant growth from 41% in 2021 to half of the Canadian providers evaluated in 2023 offering crypto services.

Crypto Exposure on the Rise

The study further highlights a surge in crypto exposure among Canadian institutional investors, with 39% reporting crypto exposure in 2023, compared to 31% in 2021. Kareem Sadek, Emerging Technology Risk leader at KPMG, attributes this trend to Canada’s progressive regulatory environment and the escalating prices of crypto assets.

Sadek emphasizes Canada’s pioneering role in fostering a regulatory framework conducive to crypto innovation. The approval of the first Bitcoin and Ethereum exchange-traded funds (ETFs), alongside provisions for sophisticated strategies involving derivatives and Ethereum staking, has bolstered investor confidence in the crypto space.

Another important aspect influencing institutional interest in cryptocurrency is hedging against the devaluation of fiat currencies, as noted by Kunal Bhasin, partner and co-leader of KPMG’s Digital Assets division in Canada. According to Bhasin, there has been a surge in the hunt for alternative asset classes due to worries about inflation and mounting US debt. One popular choice is cryptocurrency, which has the ability to act as a depreciation hedge and a dependable store of wealth.

The landscape of traditional finance is always changing due to shifting regulations and shifting market dynamics, as more and more Canadian institutions see cryptocurrency assets as a legitimate alternative for investments.