Growing enthusiasm propels digital assets into the mainstream

An EY-Parthenon and Coinbase survey uncovers institutional investor sentiment and planned adoption of digital assets.

In brief

• The survey reveals strong investor enthusiasm for digital assets, with 83% planning to increase allocations in 2025.
• Regulatory clarity is seen as a key driver for growth coupled with innovation across the product landscape.
• Growing investor interest in new products, DeFi, stablecoins and tokenized assets.

The US election of 2024 may be viewed in hindsight as the major catalyst which propelled digital assets into the mainstream of the global financial system. After four years of skepticism, regulation by enforcement, and a host of scandals that set back the cause of decentralized finance, there is once again enthusiasm.

In no small part, crypto industry participants played a direct role in ushering in this new age. In the face of adversity, builders kept building the rails of new payment systems powered by stablecoins, investors increased allocations, and firms persevered to launch exchange-traded products (ETPs) despite a challenging regulatory environment. By necessity, the industry became a political player, donated to campaigns, and galvanized the activism required to both gain a seat at the table and demonstrate crypto’s value to the marketplace.

Just after the election, prior to the executive order on digital assets, EY-Parthenon practice and Coinbase conducted a survey of over 350 institutional investors on their plans and sentiment relative to digital assets. The survey respondents included asset managers, asset owners, family offices, private banks, hedge funds and VC firms across the globe. Many key themes emerged around the adoption of new assets, use of stablecoins, interest in tokenized assets, and the role expected regulatory clarity will play in the growth of the industry.

Investors like ETPs but seek to broaden exposure even further.

Introduced at the beginning of 2024, crypto ETPs captured outsized investor attention, with the first Bitcoin ETP growing faster than any other in history. Investors continue to show a preference for owning crypto through some form of registered vehicle. Of those who currently hold spot crypto, 55% hold it through an ETP, with 69% of those who plan to make investments in 2025 stating they intend to invest via an ETP. With a desire to explore other options, just over half of investors chose or plan to choose direct investments in crypto related equities, investment funds or with venture capital firms to gain exposure to companies building in the crypto space.

Expanded interest in DeFi to deliver returns

With so much of the crypto movement energy devoted to decentralized finance (DeFi), it is no surprise that interest in DeFi use cases continues to rise. Twenty-four percent of respondents currently engage with DeFi, and of those who do not, 50% plan to in the next two years. Use cases around derivatives (40%) and staking (38%) remain the top activities for investors currently engaged with or planning to engage with DeFi.

Seeking yield and transactional convenience, respondents turn to stablecoins.

Stablecoins, which promise to revolutionize clearing, payments and transfer of value, are used by 45% of respondents, with another 39% interested in them. Of those who currently use or are interested in stablecoins, primary drivers include yield generation (73%) and transactional convenience (71%). Investors will be watching this space closely to see how regulators shape stablecoin rules regarding clearing, payments and yield.

Diversifying holdings and democratizing access with tokenization

A cornerstone of the crypto movement has been anchored in bringing services to the unbanked through DeFi and providing access to new investments to the broadest range of clients. Tokenization promises to fractionalize mainstream and alternative assets allowing investors easier access to hedge funds, private credit, private equity and alternatives with lower minimums. This interest continues with 57% of respondents interested in investing in tokenized assets and a further 35% seeking to learn more. A majority of investors are interested in investing in tokenized alternative funds (47%), for the primary purpose of driving portfolio diversification (65%).

Charting a new digital asset future

Overall, 2025 is setting up as a pivotal year for crypto as a foundational asset class. But the way forward for traditional financial services firms (TradFi) and digital natives will look different both in challenges and opportunities. For digital natives, this is a time to double-down on investments and extend their lead launching new products, entering new markets, fortifying operations, and improving the customer experience. This is also a time to consider partnerships and decide if acquiring or being acquired is the right approach to accelerate growth. Where TradFi firms are hardened experts in compliance and governance, this is a time where digital natives must put the infrastructure pieces in place to support growth. They must fortify their technology foundation and resiliency, shore up risk frameworks and prepare for crypto to go mainstream, building the level of governance and compliance necessary to compete and stay on the right side of regulations. 

For TradFi firms, it is a time to define a coherent digital asset strategy, building on decades of experience providing banking, wealth & asset management, and payments services. For example, the repeal of the Securities & Exchange Commission’s SAB 121 at the outset of the new administration opens opportunities for TradFi firms to service existing client needs for digital assets with greater continuity with existing banking and wealth management services. Regulatory clarity globally will also play a role for TradFi firms opening new opportunities to compete globally. We expect the custody conversations to help catalyze strategy development and companies will grapple with critical questions around risk management, build vs. buy, or whether to partner for new capabilities.  

With investors surveyed seeing cryptocurrencies as the biggest opportunity to deliver risk-adjusted returns over the next three years, 2025 will be an exciting year for growth in the digital asset ecosystem. The industry is more resilient, enthusiasm is high, and a friendly administration has declared an intent to make the US the capital of the crypto world. Investors expect the conditions to be right to increase allocations, expand participation in innovations around tokenization and stablecoins and see DeFi as a place to seek return.