A resounding majority of institutional investors (74 per cent) plans to increase its use of DeFi in the next 11 months, according to a new survey by Avantgarde, a provider of asset management solutions.
The firm writes that the study reveals a shift in both the focus and intent of institutional investors, as 78 per cent of respondents say that the collapse of centralised crypto entities in 2022 (FTX, Alameda, Three Arrows Capital, Celsius, etc) has made them “more likely” to use DeFi technology today than 12 months ago.
Avantgarde polled a total of 50 institutions in the United States, each with a minimum of USD5 million invested in crypto (though two-thirds of respondents have an AUM of USD50 million or higher). The survey found that institutional investors now have a growing interest in DeFi’s value proposition of transparency, security and control.
For example, a majority of respondents at US-based institutions says: “demonstrating proof-of-reserves” (52 per cent) and “being able to retain control of assets / private keys” (62 per cent) will be influential in how they allocate investments in crypto. Likewise, more than half of C-Suite executives (53 per cent) cited “ensuring asset transparency” as a deciding factor in how they invest in crypto.
These findings are a knock-on effect from the damage and lack of trust that centralised finance (CeFi) failures caused among investors in 2022, the firm writes.
However, while institutional interest is reaching a tipping point, these investors admit that DeFi-native asset management professionals will be needed to help guide this transition. In fact, 71 per cent of CFOs polled say investment allocations will be influenced by “finding a qualified and experienced DeFi asset manager”.
When queried on the use of DeFi protocols and blockchain-based infrastructure, nearly two-thirds of respondents (62 per cent) say a blockchain-based asset management software would be “more attractive” today than it was 12 months ago.
The firm writes that the results of this survey paint a clear picture of the rapidly evolving crypto landscape in 2023 and shine a light on growing institutional investment in the DeFi space.
Mona El Isa, Founder & CEO at Avantgarde, comments: “It’s exciting to not only see growing interest in DeFi by institutional investors – but also a genuine desire and commitment to allocate capital to the space in the near future. These findings echo the conversations that Avantgarde is having with several institutional investors across the US, UK and Europe.
The rails that traditional finance (TradFi) currently runs on are slow, complex and, in many cases, archaic. We truly believe that the value proposition of DeFi and the blockchain – its transparency, auditability, composability, permissionless nature and options for self-custody – will make the heritage financial model obsolete.
We look forward to working with institutional investors as they seek to leverage DeFi technologies to manage assets on-chain and join the digital asset revolution.”