A study by KPMG identified an increase in crypto investments by institutional investors in Canada in 2023.

Increase in crypto adoption in Canada

The bi-annual Institutional Adoption of Cryptoassets survey showed a revival in the Canadian investment industry’s interest in cryptocurrencies after a difficult 2022 for the sector.

Kunal Bhasin, a partner and co-leader at KPMG in Canada’s Digital Assets practice, said that the combination of increasing U.S. debt and rising inflation is likely to have been a significant catalyst for the cryptocurrency boom in 2023. This indicates that investors are looking for alternative asset classes that provide protection against currency devaluation and serve as a reliable store of value.

The survey results suggest that among these institutional investors and financial services organizations in Canada, crypto assets are becoming increasingly recognized as a legitimate alternative asset class.

The share of institutional investors who are users of cryptocurrencies increased dramatically in 2023 as they became 75 percent against a year earlier when the value was only 29 percent.

Some 65% of respondents, including hedge funds, family offices, pension funds, private equity, and venture capital firms, held positions in stocks related to crypto, up from 36% in 2021.

Interest in crypto derivatives increased in Canada

Also, interest in cryptocurrency derivatives considerably grew, with 42 percent of the organizations having exposure, a significant increase from the previous 14 percent.

Wealth management has significantly decreased the coverage of crypto financial advice, with only 14 percent of companies including them, down from 42 percent in 2021. Many crypt companies have moved considerable parts of their business to Canada in the past year as a response to the tough regulatory measures imposed by U.S. authorities.

For example, Coinbase, a digital currency exchange, announced it had staked a presence on Canada’s West Coast, praising the country for its proactive rather than punitive regulatory position.

Kareem Sadek, the lead in emerging technology risk and co-lead for Digital Assets at KPMG, also commented on Canada’s role in initiating a regulatory environment that enables innovation in crypto assets. He argued that those regulatory actions, coupled with the rise in crypto asset prices, are the major factors attracting institutional investors into the crypto industry.

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