Cryptocurrencies need to woo institutional investors

There needs to be a lot more involvement and buy-ins from institutions to drive further acceptance of the digital assets


INSTITUTIONAL investors’ participation in cryptocurrencies would help widen the acceptance of digital coins as an asset class in the country, Luno Malaysia Sdn Bhd said.

Its country manager Aaron Tang said the exchange is open to discussing with any institutions with interest in cryptocurrency as most investors are currently involved in their personal capacity even if they work for major mutual funds.

“We would love to see more and more institutions considering investing in cryptocurrency. We expect that to happen, but not yet.

“There needs to be a lot more involvement and buy-ins from institutions. If we want to drive further acceptance, it is definitely through partnerships with other financial technology companies, or even the big banks and some other investment platforms,” Tang said in a virtual media briefing yesterday.

Tang said bitcoin, which surfaced just over 12 years ago, still has much growth potential and is not too late for investors to reconsider their positions on it.

He said bitcoin’s real value can be seen in global adoption over time and in emerging use cases whether as a payment method, a store of value or a hedge against inflation.

He added that bitcoin could further grow as an investment instrument for diversification as some financial advisors in Malaysia are considering bitcoin as an asset class for their portfolio diversification.

“There are financial advisors that have issued guidelines for investors who want to diversify.”

Bitcoin prices remain volatile and are seen as a highly speculative investment, causing some institutional investors to shy away from digital assets.

Tang said Luno Malaysia, the first digital asset exchange approved by the Securities Commission Malaysia, has over 300,000 customers to date and its digital assets under custody stood at more than RM1 billion earlier this year.

In the briefing, Tang rebutted bitcoin critics over its carbon footprint, saying the mining of the digital currency consumes a tiny portion of the energy used by the financial sector, standing at around 0.55% of the total global energy production.

“Currently, 39% of bitcoin mining is performed with renewable energy (RE) and 76% of miners use renewables as part of their energy mix, more than in other industries. This is because RE is currently cheaper than non-RE.”

He added that bitcoin miners opt for the cheapest power and they move to regions where power is cheap and clean.

He argued that bitcoin could potentially replace and combine many existing financial systems and help reduce global carbon emissions as a result.

On criminal activities often linked to bitcoin, he said the conjecture surfaced mainly due to beliefs that bitcoin transactions are anonymous.

The assumption is “far from the truth” as bitcoin transactions are transparent for anyone to view where movements of transitions are traceable.

“Bitcoin is actually a pseudonym and all transactions recorded on the blockchain are immutable. Each user’s transaction history is available for anyone to view and trace, making bitcoin a particularly bad tool for illicit activities.”