Digital assets and their role in the global economy has rapidly developed over the past few years, leading to an increasing number of family offices starting to view them as a valid and promising asset class. This increased interest is also aligned with the broader digital transformation which family offices are experiencing – it is estimated that 38% in the Asia-Pacific region plan to increase their exposure to cryptocurrencies in 2022. However, as a unique emerging asset class, the management of digital assets isn’t without its challenges. With it comes security, regulatory, compliance and operational requirements which can be difficult to meet for those not in the digital asset industry.
In this CoinDesk webinar, Hex Trust was joined by Isola Capital to provide tailored insights for their clients and to help them appropriately navigate the digital asset space in a safe, secure, and scalable manner.
What’s driving Family Office & UHNWIs interest in digital assets?
The creation of a new asset class is extremely rare – and thanks to blockchain technology, we now have permissionless decentralized digital assets, first introduced by Bitcoin in 2008. The introduction of such technology introduced a groundbreaking way to address the traditionally isolated and siloed financial markets – no physical limits (like with gold) and no country borders (like with commodities and equities).
Family offices, UHNWIs and institutional investors no longer see Bitcoin as just digital gold, or Ethereum as a technology play. The attention is increasingly shifting to the utilization of digital assets, and being able to actively participate in the digital asset economy. This is clearly reflected through the continuous activity taking place in the metaverse, and the increasing range of NFTs available from visual arts to in-game assets.
Family offices and UHNW investors are now looking at the full breadth of services that digital asset custodians provide – being able to monetize the assets with 24/7 accessibility, accessing top tier DeFi protocols, and leveraging the highest level of security available in the market. Investors are increasingly demanding connectivity to on-chain services and DeFi applications – providing them opportunities for staking, wrapping, delegating, governance, trading, liquidity provision, token issuance, as well as financing solutions.
Family offices are entering a stage of digital transformation
Investing in digital assets is now part of a broader digital transformation which is taking place across institutions, organizations and individuals. This is the same for family offices – they are introducing new digitized business processes, novel methodologies to manage investments and client interactions, as well as expanding their portfolios to include the new asset class.
For digital assets specifically, investors need to be able to grasp the main types of digital assets which are in circulation, as well as their respective ownership responsibilities.
What are top considerations for Family Offices & UHNWIs when it comes to digital assets?
Family offices and UHNWIs are sophisticated investors at the forefront of new asset class adoption. For example, over the past two decades, there have been alternatives such as PE and VC which have been increasingly adopted into mainstream portfolios for large endowments and family offices. Digital assets will benefit from more credible participants, providing sustainable investment strategies which are repeatable rather than speculative one-off moves.
Additionally, investors should note the role of institutional-grade platforms with credible counterparties, exchanges or custodians when it comes to investing and trading digital assets.
Although there are numerous considerations for all investors, sophisticated investors such as family offices and UHNWIs face a higher risk associated with tapping an emerging asset class. This is where digital asset custodians like Hex Trust, can step in to mitigate some of those risks.
As a licensed custodian, Hex Trust is able to meet the regulatory, operational and compliance requirements of the respective jurisdictions in which the client operates. This eliminates the need for the client to take on the additional task of ensuring the requirements are met themselves. Additionally, with Hex Trust’s institutional-grade infrastructure, clients can access the highest level of security and safekeeping available in the market. This is core to the idea of custody, and with the frequency of hacks and attacks in the digital asset industry, this is the most important consideration for big players. The additional layer of universal connectivity and ability to utilize custodied assets allows investors to kill many birds with one stone – accessing Hex Trust’s full range of services such as trading, financing and brokerage.