Institutional interest in cryptocurrency and digital assets are continuing to grow. Morgan Stanley is the latest legacy financial firm to express their support of the crypto asset class. The multinational firm joins a list of notable organizations such as Goldman Sachs, Microsoft, Visa, IBM, and Fidelity.
The support for crypto is so great, that Morgan Stanley hailed it a new institutional investment class, according to their latest research.
In their report, “Bitcoin Decrypted: A Brief Teach-in and Implications”, the investment bank explored the last several months of Bitcoin. They also observed trends and insights in the market. Morgan Stanley researchers observed a “rapidly morphing” thesis of the crypto space. The report also noted changing opinions of bitcoin since its introduction almost 10 years ago.
The Incredible Transforming Asset Class
The research arm of the financial giant contends that Bitcoin has seen an incredible “transformation” since its inception. It has gone from a computer science problem-solving algorithm, to a payment system and most recently, a new class of institutional-grade investment. Many investors trust Bitcoin completely and pronounce their faith in the future of the asset.
Authors of the report credit a number of factors to Bitcoin’s fascinating transformation in its first decade. Some of these factors include the immutable unchanging accounting ledger, hard forks, hacker attempts, new technologies threatening to be cheaper/faster than Bitcoin for transactions, and market volatility, among others.
Morgan Stanley goes on to explain the number of crypto assets under management has increased dramatically since January 2016. Currently, hedge funds, venture funds and private equity companies are estimated to have about $7.11 billion under management.
Financial institutions are increasingly backing crypto as a legitimate asset class. The decision to create a custody solution by Fidelity, Coinbase, and others.
The report goes on to detail three major problems that will need to be overcome in the emerging asset class.
Hurdles Still to Overcome
Regulatory uncertainty is a major challenge for the crypto market and its projects. Getting regulators to not only understand, but support the often lofty aspirations of cryptoassets is an incredible feat. However, we’re seeing traction with organizations like the SEC who launched FinHub as a means to foster open communication between the regulatory body and emerging financial technology companies.
The second challenge is the current lack of regulated custodial solutions. While it’s true the Qualified Custodian space is sparse currently, that is changing. Coinbase was recently approved as a Qualified Custodian in the state of New York, and Fidelity plans to launch its institutional crypto exchange and custody solution soon.
The third challenge noted in the report is an insufficient number of large financial institutions in the space. Again, we’re seeing that tide begin to turn with the entrance of Fidelity, Goldman Sachs and major universities beginning to allocate into the crypto space.