According to a report released yesterday (18th) by Coinbase and consulting firm EY-Parthenon, institutional investors' interest in cryptocurrencies continues to rise despite the recent market downturn, with 83% of surveyed institutions planning to increase their cryptocurrency allocations by 2025.
The survey, conducted in January, polled 352 institutional decision-makers and found that their confidence in digital assets is growing as regulations become clearer and more use cases emerge. 59% of respondents plan to allocate more than 5% of their managed assets to cryptocurrencies by 2025.
These institutions generally believe that cryptocurrencies will provide "attractive risk-adjusted returns" over the next three years, and therefore remain optimistic about the field.
Altcoin ETFs may drive institutional investment
On the other hand, the report also points out that if the US regulatory authorities approve the listing of Altcoin ETFs, institutional investors' allocation to Altcoins may further increase.
Currently, the US Securities and Exchange Commission (SEC) is reviewing more than a dozen Altcoin ETF proposals, and the market expects that if approved, it will provide a more convenient channel for institutional capital to enter the market.
According to analysis by Bloomberg Industry Research, Litecoin, Solana and Ripple are the most likely targets to be approved in the short term, and these assets have also become popular choices in institutional portfolios.
Institutional capital flows into Stablecoins and DeFi
At the same time, Stablecoins and Decentralized Finance (DeFi) are also attracting the attention of institutional investors. The report shows that 84% of the surveyed institutions already hold or are evaluating the application of Stablecoins.
Institutional investors use Stablecoins for a variety of purposes, including:
· Yield generation (73%): Participating in DeFi lending, staking and yield farming through Stablecoins.
· Foreign exchange trading (69%): Using Stablecoins as a tool for international payments and currency exchange, reducing transaction costs and time.
· Internal cash management (68%): Incorporating Stablecoins into corporate financial management as a short-term cash management tool.
· External payments (63%): Using Stablecoins for cross-border payments to improve settlement efficiency.
Additionally, it is worth noting that only 24% of institutional investors currently use DeFi platforms, but the report indicates that this proportion will grow to nearly 75% within the next two years.
Crypto companies seek banking licenses to tackle financial regulation challenges
According to a Reuters report, many cryptocurrency and fintech companies are applying for banking licenses in the US, hoping to obtain legitimate banking status under the more relaxed regulatory environment of the new Trump administration.
The advantages of obtaining a banking license include:
· Enhancing market credibility: Companies with a banking license will gain more trust from institutional and corporate users.
· Reducing capital costs: After obtaining a banking license, companies can accept deposits, reducing their reliance on traditional banks or external financing.
· Expanding financial services: A banking license will allow cryptocurrency companies to provide more diverse financial products such as loans and payment services.
However, obtaining a banking license is not an easy task. According to Reuters data, since the 2008 financial crisis, the US has only approved an average of 5 banking licenses per year, far lower than the 144 per year between 2000 and 2007.
Although facing strict regulatory requirements, some cryptocurrency companies have successfully obtained banking licenses, such as:
· Kraken: Obtained a banking license in the US state of Wyoming in 2020, becoming the first compliant crypto bank.
· Anchorage Digital Bank: Received approval from the US Office of the Comptroller of the Currency in 2021, becoming a federally chartered bank.
· Nexo: Acquired a stake in a US federally licensed financial institution in 2022.
However, the market is still concerned about the attitude of US regulators, as obtaining a banking license means that cryptocurrency companies need to comply with traditional financial regulations such as anti-money laundering (AML) and the Bank Secrecy Act (BSA), which may conflict with the decentralized spirit of cryptocurrencies.
