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Cryptocurrencies,  Regulation

State Street survey: 94% of big asset managers to invest in crypto by 2020

The financial services giant found excitement around tokenized assets and bullishness on a 2020 bitcoin ETF

Large institutional investors aren’t just starting to get into digital assets, they’re already there, according to a survey by one of the biggest financial services firms in the United States.

According to State Street Corporation, 94% of the 101 large asset managers and owners who responded said they either have digital assets under management or are planning to add them in 2020. 

More than one third (38%) said they plan to increase their holdings. Another 45% will at least maintain their current investments. Only 6% are not planning to invest in digital assets.

The respondents were from large firms, primarily those with at least $100 billion in assets under management, said Brendan Paul, a State Street spokesperson. With $2.95 trillion in assets under management and $32.9 trillion under custody, State Street is the 12th largest U.S. bank, according to S&P Global Market Intelligence.

“The survey supports what we have anecdotally believed for some time—the future is bright for… [firms planning to] increase allocations to digital assets-related investments,” said Nadine Chakar, global head of State Street’s Global Markets business unit, in a statement. “It’s an exciting time for technology and innovation in the industry, and ultimately investors will benefit from new technologies and a wider range of choices for constructing portfolios.”

The tokens are coming

Tokenizing traditional assets on a blockchain will cause massive market disruption within five years, 45% of the asset managers surveyed predicted. It will also democratize investing for retail investors, 36% believe. 

The respondents cited a number of big benefits from tokenizing assets, most notably improving risk management (62%) and transparency (55%). Enhanced security was also mentioned by 55% of the respondents. 

Despite that, State Street also reported that “55% say tokenized assets’ inherent risks are too great for widespread institutional adoption.”

Only 4 percent of those surveyed saw no benefit to tokenization, according to the release.

Bullish on an ETF

A majority of the respondents—55%—predicted that U.S. regulators will approve a bitcoin or cryptocurrency exchange-traded fund (ETF) in 2020.

That’s a distinctly bullish position, given Securities and Exchange Commission (SEC) Chairman Jay Clayton’s recent comments on the subject. 

SEC Chairman Jay Clayton discussing Bitcoin at CNBC's Delivering Alpha conference, September 19, 2019 (via / CNBC)
SEC Chairman Jay Clayton discussing Bitcoin at CNBC’s Delivering Alpha conference, September 19, 2019 (via / CNBC).

Speaking at the Discovering Alpha conference on Sept. 19, Clayton was blunt.

The SEC would have to be confident that investors will be able to find a fair and honest price for bitcoin or any other cryptocurrency, Clayton said. 

“People see the price of bitcoin trading on whatever report it is,” Clayton noted. “If they think there’s the same rigor around that price discovery as there is on the Nasdaq or New York Stock Exchange, and the protections, they are sorely mistaken.”

For an ETF to be approved, he said, “we have to get to a place where we can be confident that trading is better regulated.”

Blockchain goes big

When it comes to investing in trading technology in 2020, blockchain and the distributed ledger technology (DLT) it is built on will be even bigger than artificial intelligence (AI) and machine learning, according to the asset managers and owners surveyed.

Fully 62% said blockchain and DLT would be a key area of investment, while 50% said that about AI and machine learning, State Street reported. 

Another 65% said they believe DLT will improve future financing solutions, compared to 59% that said that about AI. 

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.