To explore how institutional investors and their various service providers are engaging with digital assets, Citi and Global Custodian conducted a survey of 220 banks, broker-dealers and asset managers to assess levels of interest and commitment.
The term ‘digital assets’ has rapidly gained purchase in the financial services industry as a contrast to the traditional scope of established financial markets. Frequent use of the term is, however, rarely accompanied by a definition.
In this paper, we take digital assets to mean essentially a basket of different asset classes enabled by a common technology, cryptographically secured on distributed ledger technology (DLT).
The results show that all segments of the financial services industry recognise the potential of digital assets to capture an increasing proportion of market activity over time, but that most firms have yet to refine their own strategic response to this development. They are nevertheless aware that client interest in future digital investment opportunities is likely to grow rapidly. For example, some of the advantages cited include greater efficiency in investment and trading processes (30%) and potential for higher returns (25%).
As a result, firms will need to make judgment calls. In the absence of a common set of standards, how do they balance individual initiative with industry collaboration? What do they require of market infrastructures to be able to provide comfort to their clients? And what digital assets are likely to capture the imagination of the institutional investors they serve and who will be given responsibility for protecting those assets post-trade?