Support for tokenisation is building but distribution remains a concern

Date: 25 Jul 2024

Karen Jones

The study with organisations invested in the digital assets sector found 75% expect more fund managers to look at the potential for tokenisation over the next three years with more than one in eight (13%) predicting dramatic growth.

Support for tokenisation of assets and funds is building among institutional investors and wealth managers but concerns about distribution remain, new global research (1) by London-based Nickel Digital Asset Management (Nickel), Europe’s leading regulated and award-winning, digital assets hedge fund manager founded by alumni of Bankers Trust, Goldman Sachs and JPMorgan, shows.

The study with organisations invested in the digital assets sector found 75% expect more fund managers to look at the potential for tokenisation over the next three years with more than one in eight (13%) predicting dramatic growth.

However, concerns about distribution issues for tokenised assets were ranked as one of the top five biggest drawbacks to wider acceptance by 75% questioned with 70% highlighting reluctance to change by investors. Around 57% pointed to a lack of established service providers with 56% worrying about a lack of demand and lack of knowledge. More than half (55%) rated regulation as one of the biggest drawbacks.

Nickel’s research with institutional investors and wealth managers in the US, UK, Germany, Switzerland, Singapore, Brazil and the United Arab Emirates who collectively manage around $1.7 trillion in assets found professional investors are well aware of the potential benefits of tokenisation.

Reduced settlement times were ranked as the biggest benefit ahead of the greater transparency brought by tokenisation and secondary market trading options. Investors questioned highlighted reduced costs as the fourth biggest benefit ahead of increased liquidity, enhanced risk management capabilities and the ability to offer fractional ownership of assets.

Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, said: “Tokenisation is moving towards widespread acceptance among institutional investors and wealth managers. There is growing knowledge about the potential benefits that tokenisation can bring with reduced settlement times, transparency and lower costs seen as the key advantages for investors.

“However, challenges remain, particularly as investors continue to show a clear preference for traditional counterparties. The positive aspect of this trend is the increasing involvement of large institutions, which showed significant engagement this year with the momentum of new entrants showing no signs of slowing down.”

(1)          Nickel Digital commissioned the market research company Pureprofile to interview 200 institutional investors and wealth managers across the US, UK, Germany, Singapore, Switzerland, Brazil and the UAE in June 2024.

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