A growing focus on security, regulatory compliance, and the blending of traditional and decentralized finance are positioning digital assets for further institutional and mainstream adoption by investors.

Over the past 12 months, several key trends have emerged in the decentralized digital asset space, reflecting its rapid evolution and growing integration with traditional finance.

The continuing strong performance of technology companies, particularly the Magnificent Seven ( Apple, Microsoft, Alphabet, Amazon.com, Nvidia, Meta, and Tesla ), is also prompting institutional investors to pay more attention to opportunities in digital assets.

In addition, the emergence of more developed AI ( artificial intelligence ) tools is providing institutional investors with better capabilities for analyzing, trading, and securing digital assets, making these assets more attractive as part of diversified portfolios.

Increasing allocations

The first key trend is that investor surveys conducted in 2023 and 2024 indicate that institutional investors are increasingly committing to digital assets despite the setbacks from high-profile corporate collapses in 2022. This indicates that a significant portion of investors are planning to increase their allocations to digital assets in the next three years, spurred by the rising legitimacy of blockchain technologies​.

A survey by EY published in March 2024 found that 94% of institutional investors believe in the long-term value of blockchain and digital assets. Over half plan to increase their allocations to these assets within the next two to three years as part of their portfolio diversification strategy. Hedge funds were noted to be particularly aggressive, with 65% planning to increase their allocations to these assets.

Another study by State Street, published in June 2024, highlighted the growing interest in tokenized assets. Around 70% of respondents were prepared to transfer traditional assets into tokenized forms, indicating a shift towards a hybrid traditional-digital asset allocation.

Another survey by Coinbase in 2023 indicated that 64% of current digital asset investors expect to increase their allocations over the next three years, while 45% of institutional investors who currently do not hold digital assets plan to make allocations in the same timeframe.

RWA tokenization

The second major trend is the tokenization of real-world assets ( RWAs ), including stocks, bonds, and real estate. These tokenized assets are being integrated into decentralized finance ( DeFi ) platforms, creating new liquidity options and bridging the gap between traditional and decentralized financial systems.

In 2024, the tokenization of real-world assets ( RWAs ) such as stocks, bonds, and real estate are becoming increasingly integrated into DeFi platforms. These tokenized assets represent a bridge between traditional finance ( TradFi ) and the digital asset ecosystem, bringing liquidity, accessibility, and operational efficiency to various asset classes.

In March, BlackRock launched a tokenized fund, BUIDL ( BlackRock USD Institutional Digital Liquidity Fund ), which grew rapidly accumulating US$2 billion in market cap by August. This is a significant development for institutional investors and decentralized organizations seeking stable returns while remaining within the crypto environment​.

Tokenized real estate is also beginning to attract investor interest as digital platforms offer fractional ownership of properties, broadening the access to real estate investments.

In Malaysia, the country’s first RWA project for real estate, The Real Lifestyle Company ( TRL ), announced on August 5 that it would tokenize US$23 million worth of residential properties to kickstart its real estate lifestyle ecosystem. The move opens the properties to retail investors who could own fractionalized shares for as little as U$50. This initiative marks a significant step in integrating blockchain technology into the real estate market, simplifying property investments through digital tokens.

Digital securities

Several financial institutions have also started issuing bonds and shares on the blockchain. Last year, for example, the European Investment Bank ( EIB ) issued digital bonds on both public and private blockchains, contributing to increased liquidity and transparency in the bond market​.

Meanwhile, decentralized finance continues to grow, with innovations such as crypto bridges for blockchain interoperability, advancements in decentralized exchanges ( DEXs ), and new governance models using governance tokens. Traditional financial institutions are also increasingly integrating DeFi elements, signifying its maturation.

With all these rapid developments in the space, regulators are also looking more closely at digital assets. Several regulatory frameworks have emerged. The European Union's Markets in Crypto-Assets Regulation ( MiCA ), for example, seeks to regulate crypto-assets, which are beyond the scope of existing financial services legislation.