From Fringe to Financial Frontier: How Crypto Is Rewriting the Rules of Institutional Investing
By Gautam Ganeshan
Once relegated to the fringes of the financial world, digital assets are now part of everyday conversation. Cryptocurrencies, NFTs, and the entire blockchain ecosystem are no longer restricted to the sphere of emerging technology and frontier investors. As the industry continues to mature, established and institutional market participants are realizing the potential that digital assets have to offer. Institutions stand to benefit from the tokenization of real-world assets, digital asset ETFs, and innovative institutional grade products.
Tokenization of Real-World Assets
The tokenization of real-world assets has received a significant amount of attention as the market continues to mature. Tokenization is the process where an asset’s interest is valued and divided into digital units where ownership is recorded on a blockchain. This asset could be a building, a bond, or even an investment fund. This process provides transparency and tamper-proof record-keeping, attracting the attention of large financial institutions. This includes the likes of BlackRock, JP Morgan, Citibank, Goldman Sachs, KKR, and Hamilton Lane, all of whom have already begun to offer some form of tokenized products to their clients or have begun to integrate the use of tokenized products into their service offerings.
So, what are the benefits of tokenized real-world assets? Enhanced liquidity, accessibility, transparency, and streamlining costs are just a few that deserve mention.
Traditionally, illiquid assets (e.g., real estate, investment fund interests) become more accessible through fractional ownership, allowing a greater number of individuals to access investment opportunities. Sponsors can also choose to lower the investment threshold. As an example, Hamilton Lane reduced the investment minimum to US$10,000 from US$2M on their tokenized private fund offering. This lower threshold ultimately democratizes access to investment products and increases accessibility.
The blockchain technology, on which the tokenized products are offered, provides an immutable and transparent record of ownership and transaction history, enhancing trust and security.
Tokenized products have smart contracts built into them, which can automate several of the functions associated with these products, including redemptions, recording of ownership transfers and distributions, which significantly reduces costs and streamlines operations such as reducing settlement periods.
As tokenized funds continue to gain popularity, they will unlock a new era of democratized and transparent investing.
Exchanged Traded Funds (“ETFs”) and Digital Asset Treasury Companies (“DATs”)
In January 2024, after ten years of rejecting Bitcoin ETF applications, the SEC approved the first spot Bitcoin ETFs and since then have approved Ethereum ETFs in May 2024. Since then, amongst other regulatory changes, in September 2025, the SEC approved generic listing standards for commodity-based exchange traded products, which would include digital assets. This is expected to increase the number of ETFs approved focusing on other digital assets (e.g. Solana, XRP, Cardano and Hedera). Additionally, it is widely anticipated the SEC will also approve ETFs to stake their assets promoting further mainstream acceptance of digital assets.
There have been further developments in 2025 which have been brought as competition to the ETFs – namely Digital Asset Treasuries (“DATs”). DATs are companies which hold a digital asset as a means of treasury and aims to increase shareholder value by increasing the amount of tokens per share. This is achieved through various means including financial engineering, yield generation, running an operating business or through acquisition.
The approval of the spot Bitcoin and Ethereum ETFs in the United States changed the game. It allowed institutions such as pension plans, endowments, and other institutional investors, to gain exposure to Bitcoin and Ethereum. This is achieved without the technical complexities of a self-custody wallet or dealing with less familiar counterparties. DATs take the opportunity for these institutional investors further by providing an opportunity for investors to accrete more digital assets per share relative to an ETF. This is because a DAT has the ability to engage in alternative capital raising options (through issuing convertible bonds and preferred shares) or yield generating activities (such as staking or decentralized finance) whereas an ETF is more restricted.
However, there are certain disadvantages with owning the ETF or DAT. Most notably, the investor does not own the actual digital asset itself, and is instead relying on the sponsor to carry out the strategy and mitigate the risks of directly owning the digital assets. Additionally, there are fees associated with the ETFs and DAT operating costs which are not present when you hold the asset directly.
The approval of the spot Bitcoin and Ethereum ETFs along with the introduction of DATs in the United States represents a significant milestone, bridging the gap between traditional finance and the digital frontier.
Institutional Grade Products and Services
Digital assets did not evolve from Wall Street institutions as traditional assets did in the past. As a result, the infrastructure that institutions were accustomed to (e.g. custody, derivatives and risk management tools) was not in place until recent years.
From a custody perspective, Coinbase has been offering custody as a service since 2012 and is seen as the leading institutional custody offering in the market. There have been other large, financial market institutions who have also begun offering digital asset custody solutions, such as Fidelity Digital Assets in 2019, BNY Mellon in 2022, State Street Custody in 2023 and Deutsche Bank in 2023.
In 2017, CME introduced the Bitcoin futures contact, and since then has launched additional derivative products over Bitcoin and Ether. These futures products have allowed institutions to hedge their positions or gain exposure to the underlying asset. Additionally, CBOE in January 2024 launched spot and leveraged derivatives trading for Bitcoin and Ether futures. Further, there are other native digital asset exchanges which offer opportunities for institutions to enter into derivatives. One example is Deribit, who offers options on digital assets, and several exchanges including Binance and OKx who offer futures on digital assets.
Finally, staking represents a significant market opportunity for institutions to capture yield, and a return on their investments which may be held passively, such as fixed term deposits. There are several well-known market participants who are offering staking as a service, including custodians (e.g. Coinbase) and specific staking service providers (e.g. Figment).
The Future of Institutional Crypto
The institutional digital asset infrastructure ecosystem is rapidly maturing, presenting exciting possibilities for market participants to invest in a similar manner to how they have been investing in the traditional investment market.
However, there remain several challenges facing institutional participants, including identifying experienced and knowledgeable service providers. In our experience, there have been numerous instances where an initial service provider was identified but did not have the requisite knowledge of digital assets. This resulted in a change in service providers, increased efforts, and costs to rectify the issues.
In my opinion, digital assets represent a foundational shift in financial markets. They have the ability to meaningfully change how the world operates, and present a vast spectrum of possibilities for institutions, unlocking potential avenues for significant growth. Those that adopt a proactive approach in investing the time and resources will be well-positioned to seize the opportunities offered by the digital asset market. This includes the tokenization of real-world assets, digital asset ETFs, and pioneering institutional grade solutions.
Gautam Ganeshan
President
CFA Society Cayman Islands
Partner
KPMG in the Cayman Islands
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