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Canada’s Financial Sector Sees Surge in Crypto Asset Adoption
The Canadian financial sector experienced a noteworthy increase in cryptocurrency adoption throughout 2023, as per a recent survey conducted by KPMG in Canada. The survey revealed that financial institutions offering crypto-related products and services had grown by 22% since 2021, with institutional investors integrating crypto assets into their portfolios seeing a 26% increase during the same period.
Resurgence in Financial Services
According to the survey results, 50% of respondents now provide at least one type of crypto asset service, a significant rise from 41% in 2021. Specifically, services such as crypto trading, custody, clearing, and settlement experienced substantial growth, with 52% of firms now offering trading services, compared to none reported in the previous survey.
Furthermore, the survey indicated that 39% of respondents have either direct or indirect exposure to crypto assets, a notable increase from 31% in 2021. Direct ownership of digital assets has more than doubled, with 75% of investors currently holding these assets, up from 29% two years ago.
Kunal Bhasin, partner and co-leader of KPMG in Canada’s Digital Assets practice, expressed optimism regarding the sector’s progress, stating:
“After the setbacks in previous years, including market instability and high-profile frauds, 2023 has emerged as a year of strong recovery and confidence in crypto assets. The growing US debt and inflation have driven investors towards cryptocurrencies as a protective hedge and a dependable store of value.”
Similarly, Kareem Sadek, Emerging Technology Risk leader and co-leader of the practice, highlighted regulatory advancements as a significant catalyst for the resurgence:
“Canada has positioned itself as a front-runner in the crypto market by approving the first Bitcoin and Ethereum ETFs and by supporting innovative strategies like derivatives and Ethereum staking.”
Outlook for the Industry
The survey findings also shed light on a shift towards more diversified investment strategies within the financial services sector. The average number of services offered per firm increased to two or three, up from one to two in 2021.
This diversification is primarily driven by the growing demand for crypto services from clients, influencing 80% of financial services firms – a substantial increase from 50% two years ago. Institutional investors are also diversifying their portfolios further, with one-third now allocating at least 10% to crypto assets, up from one-fifth in 2021.
The market’s maturation and the development of enhanced custody solutions have encouraged 67% of investors to make their initial crypto investments, a significant rise from 14% in the previous survey.
Looking ahead, Sadek believes that the approval of an Ethereum ETF will continue to fuel institutional interest and investment in 2024:
“The recent approval of spot Bitcoin ETFs by the US SEC in January 2024 marked a pivotal moment for the industry, attracting established asset managers to the sector.”
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