The Evolution Of Institutional Interest In Digital Assets: BNY Mellon Offers Insights

The unprecedented evolution of the wealth management industry and digital assets is a fact. We are witnessing the emergence of the new crypto asset class very often classified by the investment professionals as alternative or digital commodity. As a result of this revolution, many investment institutions across the globe have been working to integrate and expand their products and services related to the digital assets. They definitely don’t want to lose in this technology race. The serious players cannot simply afford to stay behind the new paradigm of the modern digitized wealth management company.

Big investment houses have already identified the digital development trends and started setting up new division units and project teams exclusively dedicated to service their clients’ needs related to the digital assets servicing.

According to CNBC the value of the cryptocurrency market topped $2 trillion for the first time in April earlier this year driven by a rally in ether, the second-largest digital coin. In just over two months, the market capitalization of the cryptocurrency market had doubled, according to price tracking website CoinGecko.

Cryptocurrencies saw significant volatility over the course of the year, with global market cap dropping to just above US$1 trillion in July, but they crossed the US$2 trillion line again in August 2021. By comparison, gold has served as the reserve asset champion for the world’s currencies throughout most of modern history. Yet the global market capitalization of cryptocurrencies was able to reach approximately 20% of gold’s US$10 trillion (in August 2021) after just over a decade in existence.

BNY Mellon noted in the “DIGITAL ASSETS: From Fringe to Future” report.

Financial industry interst in digital assets is on the rise as 72% of institutional asset managers plan to develop solutions for asset tokenization according to the August 2021 BNY Mellon insights.

Tokenization is the process whereby an underlying asset, doesnt’t matter whether tangible or intangible, is converted into a digital “token” that acts as its proxy. This approach unlocks potential innovations in areas like:

  • custody,
  • collateral management,
  • cash and liquidity,
  • fund administration,
  • accounting,
  • payments.

The above list of innovation areas will simplify the investment workflows so the investors can dedicate more time to generating investment ideas.

Let’s not forget, the digital revolution in wealth management will be driven by artificial intelligence evolution shaping the directions of technological developments in operations and research. It requires extra resources from the wealth managers to make those developments happen or they can leverage with the know-how already available on the market. As an example Algo-Chain offer tools for Model Portfolio construction and an API to power wealth managers’ websites. It is like a quick plug-in solution that does not require any major IT developments on the client’s side.

On the asset allocation front the quickest way to gain access to cryptocurrencies is to buy exchange traded funds (products), knownn as ETFs or ETPs, dedicated exclusively to this investment theme. You can access the crypto theme by exposure to the ETFs that follow the prices of the digital currencies or the companies that service the crypto industry. The Algo-Chain’s ETF Genie is a great tool to explore and research the universe of cryptos.

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