Institutions are bringing greater rigor to their crypto investment practices, according to recent research. UK and EU financial firms plan to increase their allocation to digital assets this year, despite heightened volatility.
This is according to research by Coinbase Institutional and EY-Parthenon, which surveyed 351 financial institutions on their digital asset plans.
The trial phase of crypto is over for European institutions.
While volatility means greater risk, management institutions are expected to increase their allocations, with 73% of respondents planning to increase their allocations to digital assets.
Currently, around 5% of AUM is allocated to digital assets, but this is expected to increase from 11% to 28% by the end of 2026.
Clarity of regulation is aiding this shift in sentiment as financial firms need to know what they can and cannot do.
The report states that 86% of respondents said regulatory uncertainty was their greatest concern when investing.
Other points of note:
- ETFs and ETPs are the default gateway for crypto exposure, as these are regulated and easy to consume
- Stablecoins are becoming “institutional plumbing” centered on settlement and treasury workflows, not just trading convenience. 85% of firms in EU/UK already use or express interest in stablecoins.
- 46% of respondents expect to engage with DeFi protocols in some way by 2028
- Investors believe tokenization will begin to disrupt the current market structure framework in the near future
Regarding tokenization, 62% anticipate it will impact trading, clearing, and settlement within the next 3 to 5 years; 50% of respondents in the EU/UK are very interested in investing in tokenized assets, driven by the need for faster trading / near instant settlement.
Additional rules and compliance updates will help fuel adoption.
