Half Of Hedge Funds Are Now Investing In Crypto, Says Pwc Report

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The firm used the tools when it audited the accounts of Hong Kong-listedBC Technology Group Ltd., a blockchain investment firm whose units include over-the-counter crypto trader OSL. The difficulty of verifying crypto assets is one of several reasons why many institutional investors have Crypto services steered clear of the space, which has been dogged by examples of fraud, theft and market manipulation. If crypto asset firms can get an audit sign-off from a Big Four accounting firm, it could help alleviate some of those concerns just as the market stages its largest rally since 2017.

Half Of Hedge Funds Are Now Investing In Crypto, Says Pwc Report

Accountancy giant PricewaterhouseCoopers LLP has added cryptocurrency auditing to its list of services as the firm expands into an asset class that is steadily adopting the accoutrements of traditional finance. In terms of the main obstacles to investing, regulatory uncertainty is by far the greatest barrier (82%). Even those who do invest in digital assets cite it as a major challenge (50%). Client reaction/reputational https://xcritical.com/ risk is high (77%) as well as digital assets being outside the scope of current investment mandates (68%). Over half of the respondents said that they don’t have enough knowledge of digital assets (64%). The data contained in this chapter comes from a survey that was conducted in the first quarter of 2021 with 39 hedge funds that accounted for an estimated US$180 billion in Assets Under Management .

• PwC, the accounting, financial advisory and tax consultancy, and Elwood Asset Management have published their third annual report that examines the global crypto hedge fund landscape.
• This website is using a security service to protect itself from online attacks.
• Accountancy giant PricewaterhouseCoopers LLP has added cryptocurrency auditing to its list of services as the firm expands into an asset class that is steadily adopting the accoutrements of traditional finance.
• 64% of respondents said that if the main barriers were to be removed they would either actively accelerate investment in digital assets or potentially change their approach and become more involved.

Most crypto hedge funds trade Bitcoin/BTC (92%) followed by Ethereum/ETH (67%), Litcoin/LTC (34%), Chainlink/LINK (30%), Polkadot/DOT (28%) and Aave/AAVE (27%). Around a fifth of hedge funds are currently investing in digital assets (21%) with on average 3% of their total hedge fund AuM invested. Professionally auditing crypto assets has proven challenging, even with calls for greater industry transparency following scandals includingmissing tokensandregulatory probes.

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Accountants have struggled to verify the ownership of crypto tokens, and in an industry dominated by start-ups many firms lacked the risk-management and process controls expected by a seasoned auditing firm. According to the report, 82% of those surveyed said regulatory uncertainty remains the greatest barrier to investing in cryptocurrency. Even those who already invest in digital assets cite it as a major challenge (50%). The lack of infrastructure or service provider availability also remains a barrier, with custody being the area most in need for improvement.

“And that, I think, is definitely more than many people in the market expected to see. The price of Bitcoin has more than tripled since the start of the year, aided by announcements that firms including Facebook Inc. and JPMorgan Chase & Co.planto start tokens based on the blockchain technology that underpins crypto assets. Around a quarter of hedge fund managers who are not yet investing in digital assets confirmed that they are in late-stage planning to invest or looking to invest (26%). Each cryptographic requires its own audit tool given the different blockchains they use, Weinberger said, one reason it took so long to design the technology.

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Teams across PwC spent the past year designing tools that could match the private keys and public addresses assigned to crypto asset accounts, Ralph Weinberger, head of PwC’s Global Assurance Methodology, Learning and Education Organization, said by phone. Market Now is a volume-weighted average price computed using trades from one or more exchanges on a continuous, rolling basis. The selection of underlying exchanges is subject to change at OSL’s sole discretion. If you work for an AIMA member firm and are not registered with us for a personal login, or if you are otherwise in need of assistance, pleasecontact us. We would like to thank everyone that participated in the survey and shared their insights. If you would like to learn more about AIMA DAWG, please contact James Delaney () or Michelle Noyes ().

More than 60% of the responses were from hedge funds who manage assets of at least US$1 billion. The AIMA DAWG is tasked with driving regulatory engagement, thought-leadership initiatives and operational guidance in the area of digital assets. It encourages thought-leadership across the industry and shares innovations with market participants and regulators to create a feedback loop that encourages the institutionalisation of digital assets. 64% of respondents said that if the main barriers were to be removed they would either actively accelerate investment in digital assets or potentially change their approach and become more involved. 86% of those hedge funds intend to deploy more capital into the asset class by the end of 2021. Lucas is a journalist with a background in covering blockchain and crypto.

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He has been closely following the rising adoption of blockchain across multiple major industries and has interviewed some of the key figures leading its development. Lucas believes blockchain technology will create a more efficient, transparent and connected world, and foster access and inclusion within the global financial system. This website refers to trading of virtual assets, which may include digital securities and other complex financial products or instruments which may not be suitable for all investors. The auditor’s tools can’t access the unique alphanumeric security codes that secure each key, Weinberger said, but they do allow PwC to verify that an entity is the sole owner of the cryptocurrency holdings. This survey was put together with the assistance of the AIMA Digital Assets Working Group – a cross-section of senior industry experts including fund managers, allocators, custodians, exchanges, lawyers, consultants and other service providers.

Around 20% of the traditional hedge funds surveyed — which represent around US$180 billion in assets under management — are currently investing in digital assets, and the average percentage of their total AUM invested in digital assets is 3%. According to the report, 86% of those traditional funds that are already investing in cryptocurrency intend to invest more capital into the digital asset class by the end of 2021. PwC, the accounting, financial advisory and tax consultancy, and Elwood Asset Management have published their third annual report that examines the global crypto hedge fund landscape. The report is based on data from research in the first quarter of 2021 on crypto hedge funds. The report was also created in partnership with the Alternative Investment Management Association and provides insights into how traditional hedge funds are looking at cryptocurrency. For purely crypto hedge funds, the report estimates that the total assets under management has increased globally from US$2 billion in 2019 to nearly US$3.8 billion in 2020.