October 25, 2022
HONG KONG – The whirlwind of interest in digital assets, particularly among family offices and high-net-worth individuals, presents Hong Kong with an opportunity to emerge as an international digital assets center, but only on the premise that a clear-cut regulatory regime is introduced.
This was the major takeaway from a news conference on Monday regarding a joint report by KPMG China and Aspen Digital titled “Investing in Digital Assets – Family office and high-net worth investor perspectives on digital asset allocation”.
According to the report, 92 percent of respondents were interested in investing in digital assets, with 58 percent of family offices and high-net-worth individuals already investing, while 34 percent are planning to make such investments.
The huge upside potential is the main reason behind the surge in interest in digital assets. Since digital assets emerged around a decade ago, investors have seen outsized returns, although recent volatility may have an impact on expectations. Topping the list of interest in digital assets among existing investors is its store of wealth, said Yang He, CEO of Aspen Digital. “The report findings further validate the long-term potential of digital assets, despite recent global volatility,” he said.
Since digital assets emerged around a decade ago, investors have seen outsized returns, although recent volatility may have an impact on expectations. Topping the list of interest in digital assets among existing investors is its store of wealth, said Yang He, CEO of Aspen Digital
The fact that mainstream institutional investors are also investing in digital assets boosts the confidence of family offices and high-net-worth individuals in the sector.
Despite the pronounced appetite and rosy picture depicted by existing investors, people still harbor some concerns. “Lack of regulatory clarity” is among the hurdles holding back 83 percent of respondents from adopting digital assets, while 50 percent of them have reservations due to concerns about “high volatility”.
These are legitimate concerns as digital assets form a new asset class, Yang said. It’s a new concept to investors who need to take time developing a toolbox of knowledge before taking the plunge, said Yang.
“Compared to traditional equities, digital assets require a new fundamental analysis framework for screening investment opportunities,” he said.
Paul McSheaffrey, partner in financial services of KPMG China, said that the recent growth in the market means that new products are likely to continue to emerge while regulatory regimes will also evolve to deal with digital assets.
“Increasing allocation to digital assets requires related hedging and derivative products to allow investors to effectively manage risks. The development of such products outside of popular tokens such as bitcoin and ethereum will help to drive allocation to a wider range of digital assets,” he said.
A well-defined regulatory regime and a new research methodology to evaluate the emerging asset class could spark a pipeline for Hong Kong to become an international digital assets hub.