Regulation
Family Offices Avoid Crypto Due to Regulatory and Cyber Risks | CryptoTvplus
Family offices are notably divided on the role of crypto in their investment strategies, according to a recent report. While 39% of these private wealth management firms are actively investing in or exploring cryptocurrencies, an almost equal proportion remain indifferent.
Concerns about hacking, cybercrime and regulatory uncertainty are the main obstacles deterring greater engagement in this volatile sector.
The BNY Mellon report, which surveyed 189 family offices around the world, highlights a stark contrast in attitudes based on the size of assets under management (AUM). Among family offices managing less than $1 billion, 41% plan to increase their exposure to cryptocurrencies.
In comparison, 19% of those with assets under management of $1 billion or more are also inclined to expand their participation in the booming cryptocurrency market.
Among family offices, 80% are based in the Americas, including 15% in EMEA and 5% in APAC.
About a quarter have assets under management (AUM) ranging from $250 million to $499 million, a third manage between $500 million and $999 million, another third manage between $1 billion and $4.9 billion dollars, and the remaining 10% oversee assets exceeding $5 billion.
Despite the launch of U.S. cryptocurrency exchange-traded funds (ETFs), particularly Spot Bitcoin and Ethe ETFs this year, regulatory uncertainty remains a significant deterrent. A significant 74% of respondents cited lack of clarity in the regulatory landscape as a barrier to investment.
This figure rises to 80% among non-US family offices, indicating global apprehension about the regulatory environment surrounding digital assets.
Cybersecurity is another major concern, with 77% of family offices expressing skepticism due to the risks of hacking and other forms of cybercrime.
Lack of government support is a deterrent for 70% of respondents, while 67% believe cryptocurrencies are too volatile. Additionally, 66% do not view cryptocurrencies as a reliable store of value.
However, despite these challenges, many family offices remain intrigued by the potential of digital currencies. Around 57% of family offices want to continue exploring cryptocurrencies as they need to keep up with new investment trends.
This curiosity is fueled by the belief that cryptocurrencies present promising investment opportunities, a sentiment shared by 51% of respondents.
Executive interest within family offices also plays a role in cryptocurrency exploration, with 34% citing this as a motivating factor. Growing inflation concerns are another impetus for 30% of family offices considering investing in cryptocurrencies.
Interestingly, no interest has been reported from the next generation of family office successors, indicating a potential generational divide in attitudes towards digital assets.
The division between family offices highlights the ongoing debate over the viability and future of cryptocurrencies as a legitimate asset class. While some see significant opportunities, others are held back by considerable risks and uncertainties.
Although family offices have divergent views on cryptocurrency, 80% of them see artificial intelligence as their top investment opportunity for the next five years.
The AI landscape has been particularly transformative since OpenAI’s introduction of ChatGPT less than two years ago. Since then, the advancements in AI technologies have been nothing short of remarkable.