The emergence of digital assets in the wealth tech space and why this is the future of investing – ABP Live | Jewelry Dukan

In recent years, digital assets have emerged in global financial markets. Several banks and asset managers have now set up their own departments for digital asset management. In addition, to derive more value from their investments, investors and traders are gradually shifting from traditional markets to multipurpose digital assets. The phenomenon also gained momentum due to its popularity and acceptance among retail investors.

According to a report by Research & Markets, the digital asset management (DAM) market is expected to grow at a CAGR of 13.6 percent and reach $8 billion by 2027. This sudden growth in digital assets can present both a lucrative opportunity and a disruptive opportunity for portfolio managers over the long term.

Digital Assets: The Future of Investment

Digital assets can be described as a broad container that encompasses everything that is minted and exchanged on the blockchain. Wealthy industry experts state that digital assets like NFTs (Non-Fungible Tokens), cryptocurrencies and other valuable tokens are here to stay. For wealth management firms, this could mean as much as a $54 billion opportunity in the near future. As a result, they must take consistent steps to enter these markets sooner and prioritize digital assets as they would any other wealth generation tool.

Digital assets can be classified into five main sections: digital currencies, NFTs (Non-Fungible Tokens), stablecoins, CBDCs (Central Bank Digital Currencies) and security tokens. Digital currencies are mediums of exchange used for payments, investments or commerce and are similar to fiat money.

NFTs, or Non-Fungible Tokens, represent assets on the blockchain with a unique identity and value.

Outlook: India@2047

Stablecoins are assets specifically designed for price stability and backed by commodities, currencies, or other crypto assets. CBDCs (Central Bank Digital Currencies) are digital assets or currencies backed by a country’s central bank and used for foreign exchange, payments, etc.

Security tokens can be referred to as tokenized versions of real-world assets such as stocks, bonds, real estate, and more. With multiple options to invest and trade, digital assets have less chance of being extremely volatile and have an excess pool of liquidity in the markets, making them a safe option to consider.

Trends that are changing the boundaries of digital assets

Markets have allowed users to use digital assets to buy other assets, products, and services in both the virtual and physical worlds. Additionally, the advent of decentralized finance (DEFI) has facilitated secure access to financial products such as loans, insurance, mortgages, and more via blockchain. Additionally, digital assets allow investors to invest in tokenized assets with minimal capital, without the need for a third-party broker.

Digital assets are also emerging as a new class of product for wealth managers to add to their existing portfolios to diversify and hedge holdings. Digital assets are also being traded on exchanges, while ICOs (initial coin offers) and tokenization of assets are becoming the norm. Illiquid assets become liquid assets with the help of digitization, multi-asset trading becomes possible as well as mergers of asset classes.

Everything considered

Digitization is synchronizing the way these assets can be accessed or traded, paving the way for efficient, stable and profitable investments. It has enabled transparency in sourcing smart data, and when investors get clear data, it helps them maintain and manage their wealth with ease.

Private capital is growing faster in the markets than public capital and this can present tremendous investment opportunities for asset management companies. Wealth managers and investment tech platforms can offer tokenized products along with portfolio offerings. Financial advisors as well as wealth technology companies need to take the necessary steps to educate and inform new investors about digital assets and ensure profits for their existing client base.

To push this further, policymakers urgently need to enact regulations that are compatible with governments, financial institutions and investors. By preparing to build a resilient digital wealth management market now, wealth management organizations can evolve and adapt, turning a potentially disruptive technological change into a development opportunity.

The author is the founder of Centricity WealthTech

Disclaimer: The opinions, beliefs and views expressed by the various authors and forum participants on this website are personal.

Leave a Comment