6 crypto trends wealth managers must watch in 2022

6 crypto trends for wealth managers to watch in 2022

May 12, 2022 9:11 AM

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Cryptocurrency has quickly grown in popularity to become a viable investment opportunity that many clients are now asking for in their portfolios.

From accessing digital assets via an ETF to tax reporting on crypto transactions, here are six aspects of the emerging asset class for wealth managers to watch.

Financial advisors overwhelmingly want crypto, but they want it as a spot ETF

The lure of digital assets is growing among financial advisors. More than 70% of them say they would allocate clients' assets to cryptocurrencies in an ETF, according to a Nasdaq survey. This figure rises to 86% in the case of an index fund.

“We have seen a strong interest from investors to access digital assets through an index/basket approach,” Nasdaq head of digital asset index research Jake Rapaport said. “As demand continues to surge, advisors will be looking for an institutional solution to the crypto question.”

Despite this willingness, however, getting SEC approval may be difficult given its recent history in denying two physically backed Bitcoin ETFs late last year and only approving futures-backed Bitcoin ETFs in October.

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Financial advisors overwhelmingly want crypto, but they want it as a spot ETF

Cryptoasset regulation 2022: Where it stands, where it’s going

Increased investor interest in cryptocurrencies has wealth managers carefully monitoring the regulatory status quo for new developments that will impact their participation in the crypto market.

The SEC emerged as the key regulatory body in overseeing crypto assets with its February 2021 Risk Alert on the six main areas of risk. More recently, FINRA announced that, while deferring to the SEC on oversight, it will provide member firms with guidance on a range of crypto-related activities.

Meanwhile, in Washington, politicians on both sides of the crypto aisle are weighing in with statements and proposals of their own on the future of digital assets.

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Cryptoasset regulation 2022: Where it stands, where it’s going

2 crypto education companies merge to boost digital asset literacy for advisors

The crypto market is going mainstream, according to a survey by London-based hedge fund manager Nickel Digital Asset Management. With the move so, too, does the need to explain the intricacies of cryptocurrencies, blockchain and decentralized finance to industry professionals.

Latching onto this burgeoning interest, online crypto education firm Interaxis is joining forces with accounting continuing education company CPE World to bring cryptocurrency education to both advisors and accountants.

“We don’t sell anything. We don’t push anything. We just want to explain [cryptocurrency] from the perspective of financial advisors,” said Interaxis co-founder and certified financial planner Adam Blumberg. “We’re showing how to make it a part of their practice and how to have conversations with clients.”

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2 crypto education companies merge to boost digital asset literacy for advisors

Family offices cautiously joining the crypto party

The “patience and willingness” of family offices to think long term is what makes them “more suitable for investing in emerging asset classes like crypto,” according to Rajesh Nakadi, head of investments at BNY Mellon Wealth Management’s global family office.

A survey from the firm in February of 200 family offices revealed that 50% believe cryptocurrencies are a good investment, while 72% of those investing in crypto plan to increase their exposure.

But while more family offices are open to making crypto investments, exposure is the requisite word, as current market volatility and regulatory uncertainty dictate caution.

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Family offices cautiously joining the crypto party

Treat crypto tax reporting like stocks and bonds, Yellen says

Advisors are increasingly incorporating cryptocurrencies into client portfolios, so when it comes to income reporting during tax season, investors should think of crypto like stocks and bonds, says Treasury Secretary Janet Yellen.

“Taxpayers should receive the same type of tax reporting on digital asset transactions that they receive for transactions in stocks and bonds so that they have the information they need to report their income to the IRS,” said Yellen in a speech at American University in Washington.

However, Yellen offered no specific regulatory details, leaving both advisors and investors in the dark. “It's not that they're trying to incorrectly report the taxes,” said Sean Waters, HeightZero vice president of digital asset management. “A lot of people don't even know where to begin.”

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Treat crypto tax reporting like stocks and bonds, Yellen says

Crypto becomes the new battlefield for financial advisors to win over clients

Digital assets are here to stay, according to new research from Cerulli Associates. As many as 80% of advisors say they have been asked about crypto, while 45% expect to be investing in crypto for their clients within two years, the report found.

For many advisors, the next steps are clear. “I need to be ahead of this trend to help my clients invest more securely,” said Green Bay Advisory wealth consultant Catherine Valega.

Crypto knowledge and expertise is set to become a key differentiator, and getting up to speed on investing in crypto through traditional vehicles or direct ownership through platforms is an imperative that advisors can no longer disregard.

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Crypto becomes the new battlefield for financial advisors to win over clients