Institutional investors are significantly increasing their exposure to digital assets, with average portfolio allocations expected to double from 7% to 16% by 2028, according to a new study by State Street. This indicates a growing confidence in the space, driven by a more favorable regulatory environment and landmark policy moves that are clearing the way for broader adoption.
The study, which surveyed senior executives across asset management, reveals that nearly 60% of institutions plan to increase their digital asset allocations over the next year. This shift reflects a move beyond the experimental phase, with digital assets now viewed as a strategic tool for growth, efficiency, and innovation.
Tokenization is expected to lead this transformation, particularly in private equity and private fixed income, areas traditionally characterized by illiquidity and opacity. By 2030, over half of the institutions surveyed anticipate that between 10% and 24% of their total investments will be executed through tokenized instruments. This process of issuing blockchain-based representations of real-world assets allows for fractional ownership, faster settlement, and improved transparency.
According to the report, the primary benefits of tokenization include increased transparency (52%), faster trading (39%), and lower compliance costs (32%). Nearly half of the respondents believe that these efficiencies could translate into cost savings exceeding 40%.
As digital asset adoption deepens, institutions are embedding them into their business operations. Approximately 40% of institutions now have dedicated digital asset units, and nearly one-third have integrated blockchain operations into their overall digital transformation strategy. This includes the development of new products such as tokenized bonds, on-chain wrappers, stablecoins, and tokenized cash.
While stablecoins and tokenized real-world assets currently constitute the largest portion of institutional digital asset holdings, traditional cryptocurrencies continue to dominate the profit picture. Bitcoin (BTC) is reported to generate the highest returns among digital asset portfolios by 27% of respondents, with 25% expecting it to remain a top performer over the next three years. Ether (ETH) was cited by 21% of respondents as their current biggest returns generator, with 22% expecting this to continue in the near term.
State Street's research indicates that institutional confidence in digital assets is now operational, not just theoretical. The convergence of technologies like AI, blockchain, and quantum computing is expected to further drive innovation in traditional finance.
