Are wealth managers finally embracing digital assets?

Despite their rising popularity, particularly with younger generations, digital assets still lack widespread adoption by traditional wealth management firms. However, as regulators continue to build robust frameworks around the assets, could firms soon start to embrace them?

Over the past couple of years, several regulators around the world have sought to improve the guidance and legislation around digital assets. The US recently enacted the GENIUS Act to build a framework for stablecoins. It will require issuers to have the power to freeze and seize stablecoins, as well as conduct AML and sanctions screenings. Its goal is to ensure consumer protection and ensure the US can play a leading role in the future of digital assets. It is also just one example of other pro digital asset regulations the country is working on, with the CLARITY Act another key legislation that could build guidance for digital assets in the country.

But it is not just the US regulators that are making moves in digital asset regulations. The EU's MiCA regulation went into full effect at the end of 2024 and provides standardised regulatory frameworks for crypto-assets across all member states. While in the UK, the government recently announced plans to support digital asset firms to grow along with new legislation earmarked for 2027.

With greater protections and guidance in place, more firms could have the confidence to embrace digital assets. State Street's 2025 Digital Asset Survey claimed that respondents noted that safety and soundness of digital assets and their underlying technology (46%) and lack of regulatory clarity (43%) were the biggest barriers to the adoption of on-chain digital asset investments. Similarly, Goldman Sachs claimed its research identified that 35% institutions highlight regulatory uncertainty as the biggest hurdle for adoption and 32% see regularity clarity as the biggest catalyst for adoption. There are countless other stats also pinpointing regulation as a core barrier for digital assets, and with these changes, will firms start to embrace the technology.

Speaking to VCNews.co, Friedhelm Schmitt, Co-Founder & CEO fincite, believes digital assets are no longer a fringe topic and firms across the financial sectors are exploring them due to their high market demand. He said, 'Crypto is a structural portfolio question every wealth manager must answer. The opportunity is real: tokenized private credit already exceeds $14 billion globally, and projections point toward $16 trillion in tokenized assets by 2030.'

Despite this opportunity, the industry is still cautious, and many are watching from the sidelines as others make the first move. 'The hesitance is understandable as custody complexity, regulatory patchwork across jurisdictions, and unclear client suitability frameworks create genuine friction. But watching is not a strategy.'

Mauro Carcano, head of wealth and asset management regulation at Prometeia, believes digital assets are one of the big trends within the wealth management sector, particularly with younger generations. He said, 'They cope with the habits of new generations of customers who, on the one hand, seek greater involvement in investment decisions and, on the other, wish to have access to a wider range of investment options.' Yet, while they are a rising area of interest, Carcano sees the lack of established regulatory frameworks are holding back traditional intermediaries, stating many 'remain sceptical about this phenomenon.'

Even if more firms were willing to dive into adopting digital assets, there is a question of whether their systems could even handle the requirements. Fredrik Davéus, CEO and co-founder of Kidbrooke, explained, 'The opportunity is real, but I'd say the question is more about whether wealth managers have the infrastructure to treat them like any other asset class. Right now, most don't. The firms that will win in digital assets are the ones that can model digital asset exposure properly, within a client's full financial picture, accounting for volatility, correlation, and downside risk, and explain that clearly to the client. That's where the real gap is, and it's an infrastructure problem more than a regulatory one.'

While countries are bolstering their regulatory landscapes around digital assts, there are still gaps that could help increase adoption. Davéus, for instance, believes the most urgent gap is the ensuring firms employ the same analytical rigour they would apply to traditional assets. He said, 'Regulators have, rightly, pushed for suitability, explainability, and transparency in investment advice. Those same standards need to apply when digital assets are in the mix. At the moment, some firms are offering digital asset exposure through products that sit entirely outside their planning and advice infrastructure. That's where the risk accumulates, not in the assets themselves, but in the lack of consistency between how firms model traditional and digital portfolios.'

Another gap that regulators should explore, according to Carcano, is investor protection frameworks. He said, 'The investor protection framework needs to be extended to all forms of investment in order to establish uniform rules applicable to distribution activities.' Similarly, he also encouraged authorities to support the creation of single wallets that give users access to all forms of investments, including traditional assets and digital assets.

As for Schmitt, the biggest issue still facing digital asset regulations is harmonisation. He said, 'clear custody standards, tax treatment, and suitability rules that apply across borders. Without that, wealth managers will keep treating digital assets as an edge case rather than a portfolio category.'

However, one of the biggest issues still facing the adoption of digital assets, according to Schmitt, is the source of funds. He noted that over the past decade, digital assets have exploded in popularity and account for a large part of some funds. However, there is a lack of transparency in many of these assets. He said, 'Who can explain where these funds were coming from, specifically if not traded on regulated exchanges previously. There is still a lot of infrastructure work that needs to be done. Some will work on that, others will follow.'

As barriers and regulatory fears ease, it is likely more firms will begin to embrace the asset type. Davéus noted, 'There's genuine interest, but a lot of the hesitance is rational rather than reactionary.'

There are signs more firms are starting to fully embrace digital assets. For instance, Morgan Stanley recently broadened access to digital assets to all clients, Charles Schwab introduced digital asset futures trading, and a report from Bitwise claimed 32% of advisors in its recent survey had invested in digital assets for client accounts in 2025, up from 22% in 2024.

From the firms Kidbrooke has spoken to, Davéus noted they were not afraid of digital assets philosophically but were cautious their systems could not handle them.

'How do you incorporate a highly volatile, correlated asset into a stochastic financial plan? How do you model the tax treatment? How do you explain to a client what a 5% allocation to crypto does to their retirement probability? These are critical questions, and the firms being careful are right to be so. The ones moving fast are those that have already invested in flexible, model-driven infrastructure that can extend to new asset types without rebuilding from scratch.'

There are also some notable infrastructural challenges firms will need to address when implementing digital asset products. Davéus highlighted that firms will need consistent market data for digital assets, which is currently fragmented and unreliable from many providers. They will also need to model digital asset volatility and correlation within their existing portfolio construction frameworks, as well as need to present outcomes to clients in a manner that is honest about uncertainty, without being too alarming that clients disengage.

As for Carcano, he sees many wealth management firms still waiting on the sidelines to see if digital assets will take off. This lack of vision about the dedicated business models is preventing greater adoption of the assets in traditional firms. He noted, 'Consequently, the distribution of digital assets by an intermediary is viewed as an activity with uncertain profitability that nevertheless carries costs and reputational risks.'

However, regardless of the choices of intermediaries, Carcano is confident digital assets will soon become widespread as younger generations and new investors embrace them. This will force intermediaries to reconsider the position they will play in the future.

He said, 'In this new context, intermediaries should decide what role to adopt: 1) no role: no reputational risk in exchange for foregoing opportunities that are not yet clear; 2) hub: investors will allocate a portion of their investment flows to digital assets, and the intermediary will vehicolate these to prevent disintermediation; 3) comprehensive adviser: helping clients navigate all forms of investment, both traditional and non-traditional, for example through a fee-based advisory service.'

Digital assets a path to wealth democratisation?

While digital assets are an appealing area for investors, Jurgen Vandenbroucke, managing director at everyoneINVESTED, has a different view on what the real opportunities of the digital asset sector are. He noted, 'The pattern I see is pragmatic: firms are less interested in 'crypto' as a speculative category and more interested in blockchain-enabled financial engineering that improves distribution, operations, and client experience while keeping risk and compliance controllable.'

This change, according to Vandenbroucke, is being shaped by three core factors: regulatory maturation, client segmentation clarity, and credible institutional products, including tokenised cash, tokenised funds, custody and on-chain settlement rails. However, adoption is still slowed, particularly among universal banks and mainstream private banks that are sensitive to reputational and conduct risk. 'The most consistent progress is occurring where the value proposition is immediate and familiar: cash management, fund distribution efficiency, and controlled tokenization of existing regulated instruments,' he added.

The true opportunity Vandenbroucke sees in tokenisation is the potential of democratisation of wealth management. As such, he urges firms to evaluate digital assets like any other innovation, such as what value can it create for clients and the firm and how defensible is the value. He said, 'The most compelling cases are those that improve one or more of: Distribution reach (new client segments or channels), Operational efficiency (faster settlement, automated recordkeeping), Product design (fractionalization, programmability, new liquidity profiles), Risk management (collateral mobility, transparency, better auditability).'

Vandenbroucke offered three use cases where blockchain technology can be an enabler for democratisation. The first of these is with corporate cash. He noted that in corporate settings, stablecoins are increasingly discussed as a cash-management instrument to improve treasury workflows. However, stablecoins do not typically pay yield and idle cash is economically inefficiency so treasury teams will look for yield-bearing, low-risk alternatives.

He said, 'One practical solution is tokenized deposits; another is a tokenized money market fund (MMF). The intuition is simple: a tokenized MMF can provide yield, diversified exposure, and collateral utility in a format that integrates with on-chain workflows. This matters for wealth management because it creates a bridge between treasury solutions and broader investment distribution especially for private banks serving entrepreneurs and corporate clients.'

The second use case is tokenised mutual funds for retail distribution. He noted, 'The differentiator here is not primarily tradability; if the comparison is ETFs the marginal benefit of 'more tradability' is often overstated. The stronger long-term driver is a plausible future in which digital wallets become the default interface for identity, entitlements, and asset holding. There is a regulatory and institutional tailwind toward secure, standardized digital identity and wallet frameworks. If wallets become ubiquitous, products that cannot be held in that environment risk becoming invisible to the next generation of investors.'

Finally, Vandenbroucke pointed to tokenisation through real-world assets (RWA), which he claims is where tokenisation can really transform market structure through tradability and P2P liquidity for traditionally illiquid assets, such as private equity and private credit.

He said, 'Here, tokenization is not merely a new wrapper; it can be a market design tool. This is most relevant to investors seeking tailored solutions and willing to accept complex liquidity profiles. Importantly, the 'liquidity' story must be handled with discipline: tokenization does not create liquidity as such. It can lower the friction of transfer and improve accessibility, but actual liquidity depends on market-making, incentives, governance, and a credible base of participants.'

On a final note looking to the future of digital assets, Davéus is confident they will eventually become a common sight in the sector. He said, 'I think digital assets will become a standard allocation option within wealth management within the next five to seven years, not dominant, but normalised, in the same way alternatives have been. Firms need to check whether their planning and advice infrastructure will be ready when that happens.

'The firms building flexible, model-driven platforms today, ones where adding a new asset class doesn't require a multi-year IT project, will be the ones that can respond quickly when client demand and regulatory clarity align. The firms still running advice on patched Excel models will face the same problem they face today, just with a new asset class added to the list of things they can't properly model.'