Key Takeaways
- • PwC finds the asset and wealth management industry is continuing to move into digital assets, though more cautiously after turmoil in the cryptocurrency market, with firms gaining exposure through direct crypto holdings, funds, equity stakes in digital asset natives, and tokenization.
- • PwC expects regulatory advances in the coming years, particularly on whether digital assets are commodities or securities, stablecoins, higher-risk lending practices, disclosure rules, and tax reporting requirements.
- • The US Biden administration's first-ever comprehensive digital asset framework (September 16, 2022) encourages agencies to ramp up enforcement, while the EU is in advanced stages of finalizing its Markets in Crypto Assets (MiCA) regulation.
- • PwC stresses that custody controls, vendor due diligence, and qualified custodian requirements under 40 Act rules and BSA/AML measures are central to managing digital asset risk.
- • PwC describes tokenization as potentially unlocking trillions in value but says its use by AWM firms remains in the early adoption phase.
Summary
According to PwC, turmoil in the cryptocurrency market has done little to dissuade the asset and wealth management (AWM) industry from moving into digital assets, although firms are proceeding more cautiously. AWM firms have engaged with digital assets through direct holdings of crypto assets, indirect exposure via funds, equity investments in digital asset native companies, and interest in blockchain technology and tokenization. AWM service providers are also participating through custody, trading, and infrastructure support. PwC notes that trust in the space is fractured and that firms should take proactive steps to evaluate internal controls, conduct thorough vendor due diligence, and prepare response plans for risk incidents.
On regulation, PwC expects several advances in the coming years, especially around definitions distinguishing commodities from securities, as well as progress on stablecoins, which US and global regulators have been studying closely. Policymakers and AWM leaders are calling for stricter rules following recent market turbulence, and PwC says regulators may move aggressively to limit certain higher-risk lending practices, such as loans taken against collateral received. The firm also expects updates on disclosures and tax guidance, and an expansion of US tax reporting requirements. PwC notes that a clear global framework would help asset managers operate consistently across markets, while its absence will create hurdles.
PwC cites the Biden administration's first-ever comprehensive framework for responsible development of digital assets, released September 16, 2022, which encourages US agencies to increase enforcement and address financial institutions' exposure to digital asset risks. It also references the EU's Markets in Crypto Assets (MiCA) regulation, which the Council of the EU reached agreement on June 30, 2022, designed to establish investor safeguards, capital requirements, and corporate governance rules for crypto markets.
On custody, PwC says growing interest is prompting firms to scrutinize control environments, vendor selection, and oversight. Options include exchange-based custody, third-party digital asset custodians, or self-custody. PwC recommends qualified custodians that meet 40 Act requirements, including BSA/AML measures, and protections for client assets in bankruptcy. PwC also cites its own research showing that many high-net-worth investors already hold nontraditional products such as alternatives, cryptocurrency, and ESG investments. Olwyn Alexander, PwC Global Asset and Wealth Management Leader, said due diligence on counterparties and trading platforms has become more important given the market's early stage of maturity.
PwC argues tokenization could create new markets and unlock trillions in value by enabling assets to be issued or converted into digital form on a blockchain, improving liquidity, broadening access, and automating processes. However, the firm says tokenization by AWM firms remains in early adoption and faces challenges including operations, interoperability, data, and compliance. PwC concludes that building trust through education, risk management, and governance will be critical to the long-term success of digital asset strategies.
On regulation, PwC expects several advances in the coming years, especially around definitions distinguishing commodities from securities, as well as progress on stablecoins, which US and global regulators have been studying closely. Policymakers and AWM leaders are calling for stricter rules following recent market turbulence, and PwC says regulators may move aggressively to limit certain higher-risk lending practices, such as loans taken against collateral received. The firm also expects updates on disclosures and tax guidance, and an expansion of US tax reporting requirements. PwC notes that a clear global framework would help asset managers operate consistently across markets, while its absence will create hurdles.
PwC cites the Biden administration's first-ever comprehensive framework for responsible development of digital assets, released September 16, 2022, which encourages US agencies to increase enforcement and address financial institutions' exposure to digital asset risks. It also references the EU's Markets in Crypto Assets (MiCA) regulation, which the Council of the EU reached agreement on June 30, 2022, designed to establish investor safeguards, capital requirements, and corporate governance rules for crypto markets.
On custody, PwC says growing interest is prompting firms to scrutinize control environments, vendor selection, and oversight. Options include exchange-based custody, third-party digital asset custodians, or self-custody. PwC recommends qualified custodians that meet 40 Act requirements, including BSA/AML measures, and protections for client assets in bankruptcy. PwC also cites its own research showing that many high-net-worth investors already hold nontraditional products such as alternatives, cryptocurrency, and ESG investments. Olwyn Alexander, PwC Global Asset and Wealth Management Leader, said due diligence on counterparties and trading platforms has become more important given the market's early stage of maturity.
PwC argues tokenization could create new markets and unlock trillions in value by enabling assets to be issued or converted into digital form on a blockchain, improving liquidity, broadening access, and automating processes. However, the firm says tokenization by AWM firms remains in early adoption and faces challenges including operations, interoperability, data, and compliance. PwC concludes that building trust through education, risk management, and governance will be critical to the long-term success of digital asset strategies.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.