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  • A recent survey found that institutional investors are most concerned about asset custody when it comes to investing in cryptocurrencies.
  • Price volatility and regulatory environment were also major concerns holding investors back from dabbling in the new asset class.
  • Respondents were optimistic about crypto prices if the US SEC is granted extra powers to govern crypto.

While the digital asset industry witnessed tremendous growth in institutional adoption in the past year, a recent report highlighted that institutions are still hesitant to dabble in cryptocurrencies due to the security risks associated with the industry. 

Security remains the biggest concern for institutional investors

The largest regulated cryptocurrency hedge fund manager in Europe interviewed 50 wealth managers and 50 institutional investors across the United States, UK, Germany, France and the United Arab Emirates who collectively manage roughly $108.4 billion in assets.

The report stated that 79% of participants found cryptocurrency custody is the key consideration for deciding whether to invest in the new asset class. 

Henry Howell, head of business development at Nickel Digital stated that respondents have “identified custody and security as a critical differentiator to this unique asset class.”

67% of the respondents cited concerns of price volatility and 56% cited market capitalization as a concern.

Roughly 49% of the institutional investors were wary of the regulatory environment, while 12% had concerns of the carbon footprint from Bitcoin mining and other cryptocurrencies in their top reasons for not investing in the new asset class.

Additionally, 76% of survey respondents were optimistic that the chair of the United States Securities & Exchange Commission, Gary Gensler will be able to get Congress to provide the agency with more authority to provide further guidance and regulation to the crypto industry by next year.

73% of the surveyed institutional investors believe that if SEC is granted extra powers to govern cryptocurrencies, it will have a positive impact on the digital asset prices, while 32% believe that it will have a “very positive effect.”