Crypto Transparency Top of Mind for Institutional Investor Execs

About three-quarters of surveyed institutional investors plan to move more toward DeFi in 2023 in an effort to ensure asset transparency after the crash of various centralized crypto firms last year.

The study, conducted by blockchain-based finance firm Avantgarde, polled 50 US institutions with a minimum of $5 million invested in crypto. Two-thirds of the respondents have at least $50 million in assets under management.

About half of the institutions said demonstrating proof of reserves would influence how they allocate to crypto, while 62% said being able to retain control of assets, or private keys, would affect that decision.

In all, 53% of C-suite executives cited “ensuring asset transparency” as a deciding factor in how they invest in the space.

This priority from leaders in the space comes after a year capped off by the bankruptcy of crypto exchange FTX. While competing exchanges rushed to offer proof-of-reserves reports following the company’s collapse, industry participants told Blockworks, many leave much to be desired.

“The rails that traditional finance currently runs on are slow, complex and, in many cases, archaic,” Avantgarde CEO Mona El Isa said in a statement. “We truly believe that the value proposition of DeFi and the blockchain — its transparency, auditability, composability, permissionless nature and options for self-custody — will make the heritage financial model obsolete.”

Despite a willingness to move more toward decentralization, DeFi-native asset management professionals will be necessary going forward, respondents agreed.

Though 62% of respondents say blockchain-based asset management software is “more attractive” today than it was 12 months ago, about 70% of polled chief financial officers say finding “a qualified and experienced” DeFi asset manager is crucial.

The survey comes as various financial services giants have touted the use case of blockchain technology, particularly tokenization.

A survey by BNY Mellon in October found that 70% of institutional investors would increase their digital asset activity if services like custody and execution are available from recognized, trusted institutions. The study also indicated that 91% are interested in investing in tokenized products.

An executive at banking titan State Street told Blockworks last year that using distributed ledger technology to tokenize funds and private assets would be a major focus in 2023. Larry Fink, CEO of asset manager BlackRock, said in November he believes tokenization of securities is “the next generation for markets.”

Get the news in your inbox. Explore Blockworks newsletters:

The Breakdown: Decoding crypto and the markets. Daily.
Empire: Crypto news and analysis to start your day.
Forward Guidance: The intersection of crypto, macro and policy.
0xResearch: Alpha directly in your inbox.
Lightspeed: All things Solana.
The Drop: Apps, games, memes and more.
Supply Shock: Bitcoin, bitcoin, bitcoin.