A professional investor working for BlackRock explained the key reasons why institutional investors have been watching the crypto market so far, but do not dare to jump in directly. In his speech at the London Tech Week, he said that regulatory insecurity, volatility and lack of education are the main obstacles.
Where is traditional smart money?
Adam Grimsley, co-founder of Prime Factor Capital, said that although some wealthy individuals build crypto portfolios, the majority of institutional investors wait until official regulation of the market exists. At the “Zeroing In On Europe” conference on 16th of June, he highlighted the lack of regulation in London and the unwillingness of the authorities to get involved.
“Banks, institutions and professional investors have been left at the ‘start line.’ The usual advantages of size, infrastructure, connections and reputation have shown to be obstacles to move quickly into this space. Concerns around volatility, lack of liquidity, and regulatory uncertainty were more than enough to prevent the so-called traditional smart money from entering the arena.”
James Radecki, Global Head of Business Development at Cumberland, said in a panel discussion that institutional money is starting to move into the market and that the decline in volatility is proof of that.
Bitcoin & Crypto: ‘Huge potential to despair’
Uncertainty about regulation is the biggest obstacle for larger investors and institutions. Grimsley pointed out that cryptocurrencies are unregulated in the UK and that the Financial Conduct Authority has little ambition to get closer to the market. He also acknowledged that the UK Treasury Committee has set up a task force to gain some understanding of the new technology.
With regard to crypto exchanges, he said that the recent hacks raise questions about the safety of funds on the respective stock exchanges. By doing so, Professional Services are warning you to use these exchanges because they are required by law to act in the best interest of their clients. At the moment, it seems institutional investors are just waiting for something to finally happen in terms of regulation. Japan has already taken a pioneering role and will initiate a regulatory framework in the coming months.