Nov 10: The Middle East is expected to lead growth in institutional digital asset adoption over the next three years beating the US and EU, new global research (1) from London-based Nickel Digital Asset Management (Nickel), Europe’s leading digital assets hedge fund manager founded by alumni of Bankers Trust, Goldman Sachs and JPMorgan, shows.
Research with more than 200 senior executives at institutional investors and wealth managers found more than a third (35%) expect the Middle East to lead the way ahead, compared to around a quarter (24%) choosing the US and the EU including Switzerland. Just 7% selected the UK and 6% Asia Pacific.
Nearly half (45%) say access to sovereign and institutional capital make the Middle East attractive for the digital asset sector, while around two out of five (42%) point to Government support for the market in the region. Around 37% highlight tax efficiency and 32% the speed of regulatory and policy development.
The study identified the UAE as being best positioned to become the leading institutional digital asset hub in the region. Around two out of five (41%) chose it ahead of 34% selecting Saudi Arabia and 9% Qatar, with 6% picking Bahrain.
The research across the US, UK, UAE, Germany, Switzerland, France, Italy, the Netherlands, Singapore, Brazil and the Nordics found respondents expect the Middle East to be established as one of the world’s top three institutional digital asset hubs by 2030.
However regional geopolitical risk remains an issue – nearly nine out of 10 (88%) questioned say geopolitical risks are a factor in allocation decisions involving digital asset exchanges, custodians or managers based in the Middle East. For 29% they are a significant factor.
Institutional investors and wealth managers would also welcome stronger UAE-based regulatory and custody infrastructure – a third (33%) say their organisation would be much more likely to allocate to funds, managers or products in the region as a result of this, with a further 57% saying they would be slightly more likely to do so.
There is confidence in Middle Eastern regulation with 31% saying jurisdictions such as UAE and Bahrain are more effective at mitigating institutional digital assets risks than Western counterparts while 55% say they are about as effective. Just 10% say they are less effective.
More than one in five (22%) say their use of Middle East-based digital asset products, managers or service providers will increase significantly over the next two years while 60% expect their use to increase moderately.
Institutional investors and wealth managers are aware of potential barriers to success for digital assets in the Middle East – 22% cite the limited institutional track record and ecosystem in the region while 15% are concerned about a lack of local talent and operating history as well as market liquidity and the range of institutional digital asset investment products.
Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, said: “The Middle East has worked hard to become a global focal point for digital asset investment and tokenised finance driven by a combination of progressive regulation and access to sophisticated institutional capital and growing real-world adoption of digital finance.
“Institutional investors and wealth managers recognise the structural growth already taking place across the region and are increasingly looking beyond near-term events to the longer-term opportunity. The direction of travel is clear: the Middle East is building the regulatory framework, capital base and institutional infrastructure required to establish itself as one of the world’s leading digital asset hubs.
