This was published 1 year ago
Investors aren’t sweating the crypto plunge: State Street
Banking giant State Street says global asset managers remain undeterred by the cryptocurrency “winter” as they gear up to launch a barrage of new digital asset and crypto products.
The price of cryptocurrencies has plunged this year as interest rates have risen, with bitcoin tumbling more than 50 per cent since January, in what has been dubbed a “crytpo winter”.
However, the rush of new financial instruments attached to the crypto trend would indicate that the traditional players are banking on the asset class to stick around.
State Street Digital’s product lead for Asia Pacific, Irfan Ahmad.Credit: Oscar Colman
Irfan Ahmad, the digital lead for Asia Pacific at State Street Digital, said the outfit’s institutional clients were still keen on crypto and the underlying technology that supports digital assets.
State Street is the world’s largest custodian bank, meaning it holds financial assets on behalf of investment managers. It is working with asset management firms as they look to gain exposure to the crypto sector.
“During the course of the June, July period where things were really hotting up in terms of activity, we saw institutional clients not necessarily double down, but they weren’t really deterred from placing strategic bets on the asset class itself,” Ahmad said in an interview.
“The takeaway from that is, I think there is a belief that the asset class is here to stay. And we, as an asset servicer, will obviously partner with our clients where they believe their ambition lies.”
With the exception of the Commonwealth Bank, which last year announced a crypto investing pilot that has since hit regulatory delays, most Australian financial institutions have steered clear of cryptocurrencies, viewing them as too risky.
However, some overseas giants are moving into crypto assets. Last month Goldman Sachs launched its first bitcoin-backed loan, while investment behemoth BlackRock launched a product that gives institutional clients exposure to Bitcoin.
Ahmad noted Goldman’s move, and indicated other big institutional players were likely to make further moves into the crypto space.
“Certainly, our clients, they’ve been speaking to us more pragmatically about how they might be able to launch products, or what our capabilities may be in the future to help them support the launch of those products.”
The Australian Securities and Investments Commission (ASIC) has repeatedly warned retail investors about the risks of investing in cryptocurrencies and Ahmad believes a concerted push to develop regulatory “safeguards” to protect investors could be a key silver lining of the recent crypto plunge.
He said the recent turmoil in crypto markets had allowed regulators to “observe what happened, and use that as a call to action to provide some guardrails for institutional and retail investors.”
The price of cryptocurrencies has plunged this year as interest rates have risen, with bitcoin tumbling more than 50 per cent since January.Credit: Bloomberg
In Australia, State Street is the fund administrator for the Cosmos Purpose Bitcoin Access exchange-traded fund (ETF), which says it is the country’s first physically backed Bitcoin ETF.
Ahmad said new crypto product launches were expected in the Asia-Pacific region, including in Australia, in the “very near future,” without providing further details.
ASIC last year gave the green light to crypto ETFs, and market operator ASX Ltd has previously said cryptocurrencies would play a bigger role on the stock exchange over time.
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