Ben Strack

BitGo’s latest acquisition reflects what appears to be a growing trend: increased demand for crypto-related services by the wealth management segment.&nbsp;



The crypto company bought HeightZero, the firm said Tuesday — a platform that gives wealth managers tools to gain digital asset exposure on behalf of clients. It offers to financial advisers familiar capabilities, such as portfolio rebalancing, tax loss harvesting and automated billing.&nbsp;



This acquisition puts BitGo in a position to offer “turnkey, compliant and secure solutions” for registered investment advisers (RIAs) and asset managers, according to Steve Scott, the company’s director of institutional sales.&nbsp;



“<a href="https://blockworks.co/news/sec-grayscale-spot-bitcoin-etf">When an ETF gets approved</a>, RIAs and asset managers are going to see huge demand from their clients for bitcoin,” he told Blockworks in an email. “It will be critical for asset managers and RIAs to have secure and regulated custody products available for their clients to be able to participate.”



Scott declined to disclose the terms of the deal.&nbsp;



The transaction comes in response to an apparent need by asset allocators whose interest in crypto — and that of their clients — have been tempered by various barriers.&nbsp;



“Digital assets and blockchain technology are quickly moving to the forefront of wealth management, making it critical to provide solutions to a wide range of asset managers and RIAs,” HeightZero co-founder AJ Nary said in a statement.



A January <a href="https://bitwiseinvestments.com/crypto-market-insights/the-bitwise-vettafi-2023-benchmark-survey">survey</a> of various asset allocators by VettaFi and Bitwise Asset Management found that while 90% field crypto questions from clients, just 15% allocate to the space in client accounts.&nbsp;&nbsp;



Matthew <a href="https://blockworks.co/tag/matt-hougan">Hougan</a>, chief investment officer of Bitwise, said at the time that with a majority of advisers saying they have clients investing in crypto outside the advisory relationship, “2023 is the year to bring those investments in-house.”



Read more: <a href="https://blockworks.co/news/financial-advisers-unfazed-by-crypto-volatility#">Financial advisers mostly unfazed by crypto’s 2022 volatility</a>



About 38% of the respondents cited custody concerns as something preventing them from starting to invest or increasing an investment in crypto assets.&nbsp;



Marc Nichols, a product director at Arbor Digital Investment Management, said in a Tuesday statement that the combination of HeightZero&#8217;s technology platform and <a href="https://blockworks.co/tag/bitgo">BitGo&#8217;s</a> “institutional grade custody” is needed for the firm “to safely and securely deliver our full discretionary service to financial advisors in the US efficiently.”



The BitGo buy comes nearly four months after the company <a href="https://blockworks.co/news/bitgo-wont-buy-prime-trust">ditched its plan to buy crypto custodian Prime Trust</a> — <a href="https://blockworks.co/news/bitgo-bails-out-prime-trust">a deal BitGo originally noted</a> would in part give it access to more wealth management offerings.



Other deals of late have followed the same vein of meeting wealth managers where they are at on their crypto journeys.&nbsp;



Standard Custody &amp; Trust Company in July <a href="https://blockworks.co/news/standard-custody-debuts-crypto-custody-tools">linked up with on-chain wealth management platform L1 Advisors</a> in a bid to blend the security of qualified custody with the control of self-custody.&nbsp;



Anchorage Digital more recently <a href="https://blockworks.co/news/anchorage-digital-eaglebrook-crypto-sma">joined forces with crypto SMA platform Eaglebrook Advisors</a>. Advisers can now allocate to the crypto strategies on Eaglebrook’s platform through Anchorage — a bank that meets the US Securities and Exchange Commission’s definition of a “qualified custodian,” the companies said.&nbsp;



Eaglebrook CEO Christopher King previously told Blockworks “<a href="https://blockworks.co/news/eaglebrook-ceo-advisors-the-lowest-hanging-fruit-for-crypto-market">the lowest-hanging fruit</a>” for crypto is the $30 trillion wealth management market.&nbsp;



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Another crypto firm bids for the wealth management market  

More family offices are invested in digital assets than two years ago, but more also report having no interest in the asset class.&nbsp;



Roughly 26% of family offices are invested in crypto, according to a new <a href="https://blockworks.co/tag/goldman-sachs" target="_blank" rel="noreferrer noopener">Goldman Sachs</a> report — up from 16% in 2021. 



But those that have not invested — and show no interest in jumping into the space going forward — have also grown substantially, from 39% two years ago to 62%.&nbsp;



The respondents that are “potentially interested” in the asset class fell from 45% to 12% over that span, the <a href="https://www.gsam.com/content/dam/pwm/direct-links/us/en/PDF/onegs_familyoffice_eyesonthehorizon.pdf?sa=n&amp;rd=n">findings</a> show.&nbsp;



Family offices are wealth management firms that typically work with high-net-worth individuals and families. The survey, which captured responses from 166 family offices around the world, was conducted in January and February.&nbsp;



Respondents invested in the digital assets space broadly cited their “belief in the power of blockchain technology” as the top reason for their involvement in the sector. This included those invested in areas such as blockchain-focused funds, NFTs and stablecoins.&nbsp;



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="2128" height="1012" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-1-Goldman-Survey.jpg?w=1024&amp;h=1024" alt="" class="wp-image-54772" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-1-Goldman-Survey.jpg?w=2128 2128w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-1-Goldman-Survey.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-1-Goldman-Survey.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-1-Goldman-Survey.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-1-Goldman-Survey.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-1-Goldman-Survey.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-1-Goldman-Survey.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-1-Goldman-Survey.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-1-Goldman-Survey.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-1-Goldman-Survey.jpg?w=80 80w" sizes="(max-width: 2128px) 100vw, 2128px" /></figure>



The proportion of family offices in the Asia Pacific region (APAC) invested in crypto — which was 30% — was slightly higher than similar firms in the Americas, or Europe, the Middle East and Africa (EMEA). Those APAC wealth managers also appear most interested going forward, with 27% reporting as such.&nbsp;



Meanwhile the proportion of family offices in the EMEA region allocated to the space was half of APAC and 79% said they don’t intend to jump in going forward.



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="2130" height="1092" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-2-Goldman-Survey.jpg?w=1024&amp;h=1024" alt="" class="wp-image-54773" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-2-Goldman-Survey.jpg?w=2130 2130w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-2-Goldman-Survey.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-2-Goldman-Survey.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-2-Goldman-Survey.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-2-Goldman-Survey.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-2-Goldman-Survey.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-2-Goldman-Survey.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-2-Goldman-Survey.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-2-Goldman-Survey.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/CHART-2-Goldman-Survey.jpg?w=80 80w" sizes="(max-width: 2130px) 100vw, 2130px" /></figure>



The findings come after a wild year for crypto that included the <a href="https://blockworks.co/news/one-year-since-terra">demise of Terra’s algorithmic stablecoin</a>, the crash of crypto exchange FTX and falling token prices.&nbsp;



Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) and ether (<a href="https://blockworks.co/price/eth">ETH</a>) are each down roughly 60% from all-time highs reached in November 2021.&nbsp;&nbsp;



The Goldman Sachs survey follows a similar report from investment bank Brown Brothers Harriman &amp; Co last month, which showed that the events of 2022 <a href="https://blockworks.co/news/institutional-interest-crypto-etfs-cooled">had not significantly discouraged institutions</a> from putting money toward crypto funds. 



About 80% of advisers who currently allocate to crypto on behalf of clients said that they <a href="https://blockworks.co/news/financial-advisers-unfazed-by-crypto-volatility">intend to keep or increase those positions in 2023</a>, a separate January Bitwise Investments survey found.



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Interest in Crypto Plummets Among Family Offices, Survey Says

Shalini Nagarajan

<div id="highlights-block_629f11fe2f9e6" class="highlights">
 <ul>
 <li>52% of affluent Asians held crypto in Q1 2022, but 67% of wealth managers have no plans to offer related services, an Accenture survey found</li>
 <li>Investors in Indonesia and Thailand had the largest percentage of digital asset allocation compared to peers</li>
 </ul>
 
</div>



As investors grapple with seismic economic shifts such as soaring inflation and rising cost of living, more are turning to investments aiming to insulate their wealth. According to new research <a href="https://newsroom.accenture.com/news/providing-advisory-services-is-increasingly-critical-for-wealth-management-firms-looking-to-seize-growth-opportunities-in-asia-accenture-report-finds.htm" target="_blank" rel="noreferrer noopener">by Accenture</a>, 52% of well-to-do Asian investors held digital assets — including cryptocurrencies, tokenized assets and crypto funds — in the first quarter of 2022.



The study found digital assets make up 7% of these investors’ portfolios, making it the fifth-largest asset class in Asia. That means it receives a greater share of investments than foreign currencies, commodities or collectibles in the region.



Equities, fixed income, cash and real estate have a more hefty weighting compared to digital assets in their portfolios, the <a href="https://www.accenture.com/us-en/insights/capital-markets/wm-future-asia-digital-assets-unclaimed-territory" target="_blank" rel="noreferrer noopener">research</a> showed.



A further 21% are expected to enter the asset class by the end of 2022, suggesting that as much as 73% of affluent Asian investors would hold digital assets by then.&nbsp;


<div class="wp-block-image">
<figure class="aligncenter size-large"><img decoding="async" loading="lazy" width="1024" height="660" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png" alt="" class="wp-image-22522" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=399 399w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=405 405w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=340 340w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/06/2022-06-07-Accenture-survey-1024x660.png?w=1305 1305w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Asia Affluent Investor Survey, Q1 2022; Source: <a href="https://www.accenture.com/_acnmedia/Accenture/Conversion-Assets/Secure/pdf-no-index-6/Accenture-Wealth-Management-Asia-Digital-Assets-Unclaimed-Territory" target="_blank" rel="noreferrer noopener">Accenture</a></figcaption></figure></div>


Accenture said about 3,200 consumers responded to the survey, having investable assets ranging from at least $100,000 to over $5 million. They were from mainland China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore and Thailand. Investors in Indonesia and Thailand had the largest allocation to digital assets compared to their peers as of the first quarter of 2022.



Although the key statistic suggests a large chunk of Asian investors want services related to digital assets, the study found that 67% of wealth management firms aren’t planning to dive into it just yet.



<h3 class="wp-block-heading">Wealth managers remain cautious</h3>



Hesitancy due to unclear regulation is among the factors holding back wealth managers. They prefer to either maintain a wait-and-see approach, not fully believing in the potential of the asset class, or they anticipate complexities due to varying regulatory and operating models. 



“We would need to be able to provide an informed view on key crypto coins, which requires specialized research capabilities,” said Sacha Walker, head of strategy and business operations for the Asia-Pacific region at Julius Baer. 



<blockquote class="wp-block-quote">“In addition, we are currently exploring a compliant offering for suitable clients. This entails educating and training both relationship managers and clients on the risks, suitability and mechanics of digital assets.”</blockquote>



A downside to wealth management firms not offering digital asset services is it forces clients to seek advisory information online, which could provide far less reliable, according to Accenture.



The firm estimates that digital assets are a $54 billion market opportunity in Asia, of which $40 billion stem from transaction fees. The rest is split between advisory and custody fees.



A similar <a href="https://cms.blockworks.co/gemini-report-crypto-reached-tipping-point-in-2021/" target="_blank" rel="noreferrer noopener">survey</a> conducted by Gemini earlier this year shows about 40% of crypto owners around the world first bought digital assets in 2021. It found crypto ownership was the highest in Brazil and Indonesia.



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Among Affluent Asian Investors, 52% Hold Crypto, Survey Finds

<div id="highlights-block_61f068989a733" class="highlights">
 <ul>
 <li>Eaglebrook plans to expand to broker-dealer and wirehouse markets in 2022, CEO says</li>
 <li>Wealth management space has been “completely underserved” from a crypto product perspective, according to Castle Island Ventures Partner Sean Judge</li>
 </ul>
 
</div>



A cryptocurrency investment firm has raised an additional $20 million of capital as it devises new products for wealth management professionals.



The Series A investment round for Eaglebrook Advisors— a registered investment advisor (RIA) that specializes in separately managed accounts (SMAs) — was led by venture capital firms Castle Island Ventures and Brewer Lane Ventures. Other backers include Gemini’s Frontier Fund, Fidelity Investments affiliate Avon Ventures, Jump Capital and Sybil Capital.



“This funding gives Eaglebrook the opportunity to improve our technology and solutions for wealth management firms,” Eaglebrook CEO Christopher King told Blockworks in an email. “We will continue executing in the RIA market and plan to move towards the [independent broker-dealer] and wirehouse markets in 2022.”



Founded in 2019, Eaglebrook works with about 500 financial advisors and 40 RIAs in the US that allocate client capital to Eaglebrook SMAs.



Eaglebrook is focused on accelerating the adoption of crypto SMAs as the vehicle of choice for wealth management firms. Looking to go beyond bitcoin and ether, King said, the firm is looking to add products focused on decentralized finance (DeFi), layer-1 and layer-2 protocols, NFTs, gaming and yield opportunities.&nbsp;



Castle Island Partner Sean Judge told Blockworks that wealth management has been “completely underserved” when it comes to crypto products. As the wealth transfer from baby boomers to millennials accelerate, he added, advisors will look for new ways to serve the younger generation.&nbsp;



“From all the diligence we’ve done from talking with RIAs and asset managers, it’s pretty clear that they’re looking for a solution, and we believe that fundamentally over time they’re going to continue to look for a solution,” Judge said.



The US Securities and Exchange Commission (SEC) <a href="https://cms.blockworks.co/when-will-the-sec-approve-a-spot-bitcoin-etf/">has not yet approved</a> an ETF that would hold cryptocurrencies directly. The agency gave the go-ahead to<a href="https://cms.blockworks.co/first-bitcoin-futures-etf-nears-1b-on-first-day-of-trading/"> the first bitcoin futures ETFs</a> in October, though industry watchers have said such products may not be a great tool for advisors and long-term investors.&nbsp;



“From a product perspective, separately managed accounts are fundamentally just a better end product for clients,“ Judge said. “But also, what Eaglebrook has built from a technology perspective to integrate with the broader portfolio and integrate with all the other technology solutions that these financial advisors use is a really unique asset.”



The fundraise follows <a href="https://cms.blockworks.co/eaglebrook-ceo-advisors-the-lowest-hanging-fruit-for-crypto-market/">Eaglebrook’s announcement in November</a> that it would launch a crypto educational platform for advisors. King called the $30 trillion wealth management market at the time “the biggest elephant in the room and the lowest-hanging fruit” for the crypto industry.



<a href="https://cms.blockworks.co/financial-advisors-bullish-on-crypto/">A report published last week</a> by Bitwise Asset Management and ETF Trends found that the percentage of financial professionals investing client funds in crypto rose from 9% to 15% over the past year.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



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