More than half of family offices and high net worth individuals in Hong Kong and Singapore have been investing in digital assets in recent years, according to a report co-published by KPMG, in yet another sign of continued adoption despite market volatility.

58 percent of family offices and high net worth individuals (HNWI) in Hong Kong and Singapore are invested in digital assets, according to a joint study by KPMG China and Aspen Digital, a crypto asset management platform. 

All of the respondents invested in the nascent asset class owned Bitcoin while 87 percent owned Ethereum. 60 percent and 47 percent also invest in non-fungible tokens and decentralized finance tokens, respectively.

Respondents were also interested in companies offering the underlying technology with 58 percent of respondents saying they were invested in digital asset providers. 

Small Allocation

While the base of crypto adoption is rapidly increasing, the allocation remains relatively small with 60 percent of respondents allocating less than 5 percent of their wealth to digital assets while 54 percent say they want to allocate 5-30 percent in the asset class.

The two major hurdles cited for further adoption are asset valuation and regulation. 29 percent of respondents also said that the lack of tax clarity reduced their eagerness to invest in digital assets.

Regulatory Developments

Still, adoption is expected to trend upward, especially in Asia where regulators are actively attempting to balance investor protection and market growth. 

«Institutional investors are looking for a clear regulatory regime that enables the trading of digital assets. We can still expect further developments as regulators start to consider specific regimes that cater for the specifics of digital assets,» said Paul McSheaffrey, financial services partner at KPMG China.

Maturing Research

And as the market expands, other related capabilities are also expected to mature, such as research.

«Compared to traditional equities, digital assets require a new fundamental analysis framework for screening investment opportunities,» said Aspen Digital chief executive Yang He. «For example, on-chain data is a new metric to measure the network robustness of digital assets. As more institutions are expressing their interest to explore digital assets, we expect a more mature research methodology to evaluate the emerging asset class.»

The KPMG China-Aspen Digital report was based on feedback from 30 family offices and HNWIs in Hong Kong and Singapore in the second quarter of 2022. The report also included interviews with other funds and external asset managers.