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Improved security and custody standards could unlock significantly higher institutional investment in digital assets, according to new global research from Nickel Digital Asset Management, the London-based hedge fund manager founded by former executives from Bankers Trust, Goldman Sachs and JPMorgan. 

The study, which surveyed more than 200 institutional investors and wealth managers across 11 countries, found that 92% of respondents would be likely to increase their digital asset allocations if security and custody frameworks matched those used in traditional finance, with nearly one third saying they would be very likely to do so.

The findings highlight how deeply security concerns continue to shape institutional sentiment. High-profile hacks, exchange failures, and DeFi exploits strongly influence investment decisions, with 87% of respondents saying such incidents have a very or quite significant impact on their willingness to invest and only 1% reporting no impact at all. 

Cybersecurity risks were identified as the biggest barrier to increasing allocations, cited by 46% of respondents, followed closely by custody and private key management at 43%. Price volatility and insufficient liquidity were seen as less significant obstacles.

Institutions were divided on which safeguards would most increase their comfort levels. Regulated institutional custody with independent audits, comprehensive crime or cyber insurance, and independent proof of reserves and proof of liability all featured prominently. The most preferred option, however, was asset manager-managed custody with independent oversight, selected by 38% of respondents. Specialist regulated digital asset custodians and direct custody with regulated banks or trust companies also attracted substantial support.

The research also explored X digital asset strategies. A majority – 57% – said they would require audited smart contracts with ongoing monitoring, while others pointed to conservative collateral and liquidity controls or greater transparency around counterparty and protocol exposures.

Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, said the industry has made notable progress but still has work to do. “Institutional digital asset infrastructure has come a long way. But we should not confuse progress with completion. Digital assets still have some way to go before custody and security standards consistently match those that investors expect from traditional prime brokers and custodians. The opportunity for the firms that can bridge that gap is substantial.”

Nickel Digital says the findings underscore the importance of institutional-grade security frameworks in unlocking broader adoption of digital assets and accelerating the sector’s maturation.