As organizations continue to explore, plan, and scale their digital asset strategy, understanding the key benefits as well as the most difficult pitfalls is crucial.
As technology and finance progress, a growing asset class known as digital assets is gaining traction among investors looking to diversify portfolios in order to reduce volatility and ensure high returns.
When compared to traditional financial assets, digital assets have huge benefits. According to an Investing in Digital Assets Report co-authored by KPMG China and Aspen Digital, the assets have emerged as an alternative asset class in recent years, with a projected market capitalization of more than $1 trillion as of September 2022.
According to the report, the rapid rise has piqued the interest of the general public, with institutional investors entering the market. However, market volatility has been an issue, with certain digital assets experiencing huge price changes.
While the digital assets ecosystem offers numerous prospects for growth, it is still a new, complicated, and fast-paced sector with a diverse spectrum of cryptocurrencies and other digital assets available.
According to the report, the digital assets sector is growing as an alternative asset class for the Asian private wealth management business.
About 92 percent of wealthy families and individuals presently invest in digital assets or plan to do so in the future. Their interest is sparked by the potential for high returns, portfolio diversification, and boosted market confidence in the wake of institutional investors’ entry.
According to the survey, there is still some ambiguity about investing in the area because of legislation and value because digital assets are still relatively young. Investors are searching for a clear regulatory framework that permits the trading of digital assets, therefore divergent regulatory approaches to digital assets in various jurisdictions are a major worry.
However, as governments develop specific regimes to deal with digital assets, the worldwide environment is changing. The expansion of the digital asset market and investor protection appear to be priorities for Asian regulators.
Benefits and Drawbacks
The least amount of cryptocurrency is transacted in Sub-Saharan Africa, where $101 billion in on-chain volume was received between July 2021 and June 2022, accounting for 2% of global activity and representing a 16% increase from the previous year.
According to emerging trends, many young individuals in sub-Saharan Africa are turning to cryptocurrencies to protect and grow their wealth, while those in other nations are utilizing them to expand their current riches.
People have been compelled to switch to stablecoins like tether by volatility. Since the market architecture for digital assets is mostly controlled by the private sector, there is an urgent need for a coordinated global approach to regulatory monitoring to guarantee investor protection.
There have been allegations of scammers building up phony platforms to prey on novice investors, particularly in developing economies, who are looking to profit from digital assets.