New research from CFA Institute "Cryptoassets: Beyond the hype"

Authored by Stephen Deane, CFA, Senior Director, Capital Markets Policy, and Olivier Fines, CFA, Head of advocacy and capital markets policy research EMEA, this paper goes beyond the hype to understand the state of crypto investing and the implications for investors and policymakers.

The report establishes a series of recommendations for institutional investors and policymakers. CFA Institute believes that cryptoassets demand a strong and clearly defined regulatory framework to protect investors, and without such a framework, crypto will be unable to gain mainstream acceptance.

The report, Cryptoassets: Beyond the Hype: An Investment Management Perspective on the Development of Digital Finance, distills the findings from interviews with investment professionals and crypto experts, and offers a framework of key issues to consider before investing in crypto, including: valuation, fiduciary duty, custody, and safekeeping of client assets. The market events that have affected cryptoasset markets, including the sudden collapse of FTX, reinforce themes that need to be discussed and resolved in this space.

Key messages include the need for

• Investors to ground their decisions in an investment case,

• Examine crypto use cases, especially in the absence of cash flows,

• Fiduciaries to think carefully about their duty of prudence in light of the specific characteristics of cryptoassets,

• Look beyond the hype and to distinguish the disruptive potential of crypto technology from the value of individual cryptoassets,

• Ask what decentralization means in the crypto ecosystem and the conundrum this presents for accountability and regulation; and

• Establish a strong regulatory framework, for the benefit of crypto providers and users alike.