ccording to a new study, most family offices (FOs) and wealthy investors in Singapore and Hong Kong were planning to invest in digital assets in Q2 2022.

On Monday, KPMG China and Aspen Digital published a report in which they polled and interviewed 30 FOs and high net worth individuals (HNWIs) during the second quarter of the year TerraUSD collapsed and caused a bear market.

Approximately 61% of FOs and HNWIs interviewed had assets under management ranging from $10 to $500 million, with 12% managing more. 92% of those polled expressed an interest in investing in digital assets. 58% of those polled were already investing — 100% in Bitcoin and 87% in Ethereum — and 34% arranged to do so.

However, if studied today, subsequent economic uncertainty could impact those figures. The paper acknowledges that the bear market may have caused FOs and HNWIs to reconsider the benefits and risks of digital asset investment.

Mainstream interest

According to 36% of participants, mainstream institutional interest in digital assets is a crucial reason for investing. Another critical reason mentioned by 64% was high upside potential — 14% said insurance against inflation, and 7% said currency debasement.

The top three barriers to digital asset investment, according to respondents, were an absence of regulatory clarity (83% agreed), high volatility (50%), and limited study and valuation (50%). Other issues raised were tax and financial reporting (37% and 25%, respectively) and the fragmented landscape of digital asset service suppliers (20%). 

FOs and HNWIs' portfolio allocation reflects the weight of these collective issues, which have evidently intensified since May — 60% of respondents who had previously invested in digital assets distributed less than 5% of their portfolio. 20%, on the other hand, stated that they invested 10 to 20% of their portfolio.

Most FOs and HNWIs stated that regulators' viewpoints toward digital assets were critical in making investment decisions. One Hong Kong-based FO noted in an interview that the government should provide greater clarity in digital asset regulation to safeguard investors. This summer, the city government announced a bill to combat money laundering and terrorist financing that will impose stricter reporting requirements on businesses and virtual asset service providers.

Several crypto companies have fled after Singapore's recent crackdown on similar risks. In January, it began restricting crypto advertisements in public places, which tends to result in removing crypto ATMs.

The Monetary Authority of Singapore (MAS), which was once known for welcoming the crypto industry with open arms, increased enforcement in July. It threatened to restrict non-accredited investors' access to certain crypto services, remarkably leveraged margin trading. Binance, FTX, Huobi, and many other smaller companies decided to relocate.

Growing popularity despite the hacks

In Q2, respondents expressed interest in DeFi as a growing area of opportunity. Since then, attacks on protocols have increased — in October alone, three major hacks in a single day resulted in a $115 million loss.

Nevertheless, strikes on DeFi protocols have happened prior to Q2. Binance Smart Chain cybercriminals made $167 million in May 2021 through flash loans and exploits. Three months later, Polynetwork was hit for $600 million by a "white hat hacker."

Despite this and respondents' preference for regulation and security, 60% have already invested in tokens. In fact, participants ranked DeFi as the second most important area of interest among digital assets. Metaverse and NFTs came in third, with innovative contract platforms coming in fourth.

Do you think wealthy investors from Asia will continue investing in cryptocurrency? Let us know your thoughts by sharing this article on social media.

Oct 25, 2022
Digital Lifestyle

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