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Family Offices are avoiding crypto due to regulatory & cyber risks



Family offices are steering clear of cryptocurrencies, citing significant concerns over regulatory uncertainty and the threat of cyber risks.

Family offices are notably divided on the role of crypto in their investment strategies, according to a recent report. While 39% of these private wealth management firms are actively investing in or exploring cryptocurrencies, a nearly equal proportion remain uninterested. 

Concerns over hacking, cybercrime, and regulatory uncertainty are the primary obstacles deterring greater engagement in this volatile sector.

The BNY Mellon report, which surveyed 189 family offices worldwide, highlights a stark contrast in attitudes based on the size of assets under management (AUM). Among family offices managing less than $1 billion, 41% plan to increase their cryptocurrency exposure.

In comparison, 19% of those with AUM of $1 billion or more are similarly inclined to expand their involvement in the burgeoning cryptocurrency market.

Among the family offices, a dominant 80% are based in America, with 15% situated in the EMEA region and 5% in the APAC area. 

Around a quarter hold assets under management (AUM) ranging from $250 million to $499 million, a third manage between $500 million and $999 million, another third handle between $1 billion and $4.9 billion, and the remaining 10% oversee assets exceeding $5 billion.

Despite the launch of U.S. cryptocurrency exchange-traded funds (ETFs), especially the Spot Bitcoin and Ethe ETF this year, regulatory uncertainty remains a significant deterrent. A substantial 74% of respondents cited an unclear regulatory landscape as a barrier to investment. 

This figure rises to 80% among non-U.S. family offices, indicating a global apprehension towards the regulatory environment surrounding digital assets.

Cybersecurity is another major concern, with 77% of family offices expressing skepticism due to the risks of hacking and other forms of cybercrime. 

The lack of government endorsement is a deterrent for 70% of respondents, while 67% believe cryptocurrencies are too volatile. Additionally, 66% do not view cryptocurrencies as a reliable store of value.

However, despite these challenges, many family offices remain intrigued by the potential of digital currencies. About 57% of family offices want to continue to explore cryptocurrencies because they need to keep up with new investment trends.

This curiosity is fueled by the belief that cryptocurrencies present promising investment opportunities, a sentiment shared by 51% of the respondents.

Leadership interest within family offices also plays a role in driving cryptocurrency exploration, with 34% citing this as a motivating factor. Rising inflation concerns are another impetus for 30% of the family offices considering cryptocurrency investments.

Interestingly, there is no reported interest from the next generation of family office successors, indicating a potential generational divide in attitudes toward digital assets.

The division among family offices highlights the ongoing debate over the viability and future of cryptocurrencies as a legitimate asset class. While some see significant opportunities, others are held back by considerable risks and uncertainties. 

Despite family offices having diverse views on cryptocurrency, a compelling 80% regard Artificial Intelligence as their prime investment opportunity for the next five years. 

The landscape for AI has been particularly transformative following the introduction of ChatGPT by OpenAI less than two years ago. The advancements in AI technologies since then have been nothing short of remarkable.

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