Apac institutional investors call for greater regulatory clarity on digital assets: report

[SINGAPORE] More than 60 per cent of Asia-Pacific institutional investors said “appropriate regulatory regime experience” is the most important feature of a digital asset provider, an October survey by State Street reported.

This comes as global investors become increasingly bullish on the long-term prospects of digital assets, while placing greater emphasis on trust, cybersecurity, regulation and market infrastructure as adoption grows.

The study, which surveyed 300 asset managers, asset owners and wealth managers worldwide, found that scale and regulation in the digital assets space across regions need work.

“Lack of regulatory clarity within our target jurisdictions on the treatment of digital assets and investment operations and systems was the most commonly cited barrier to digital asset adoption – with 46 per cent (of respondents) placing it among their top three barriers,” it said.

Other important attributes of digital asset providers included cybersecurity (54 per cent), followed by financial strength (47 per cent).

Angus Fletcher, head of digital asset solutions at State Street, said: “(Now), investors are spending less time debating the technology and more time focused on infrastructure, operations, regulation and risk…(given how) the market is maturing.”

Growing importance of tokenisation

Institutions surveyed are anticipating “significant changes” to a wide range of investment operations in the next three years. This is due to the rise of digital assets.

More than half of respondents said that their custody, payments and fund issuance offerings would be affected.

Still, there is a growing desire among those surveyed to see regulation of digital assets and infrastructure to resemble existing structures in the market – suggesting that institutions are not seeking an entirely new financial system.

They instead hope many similar principles that undergird traditional markets will extend into digital markets, the report indicated.

Therefore, many are adapting to a new order in the market. Some 51 per cent of respondents said that they expect digital assets to be widespread in five years – if not already so.

The survey also found that 63 per cent of institutions already manage or distribute digital assets, and have systems in place should customer demand arise.

Additionally, 45 per cent of those surveyed said digital cash is “very important” to their digital asset strategy – with tokenisation and fund issuance a “priority” to 52 per cent of the respondents.

Tokenised asset settlement was identified as a leading use case (64 per cent), while bank-issued US dollar stablecoins (49 per cent) and tokenised deposits (48 per cent) were identified as the preferred forms of digital cash.