How it all started
Once viewed as a taboo investment because they existed only in the digital world, digital assets are growing rapidly in the wealth management industry.
The concept of digital assets dates back to 1998 with the introduction of Bit Gold. Then, Bitcoin was introduced only in 2008. Bitcoin utilises blockchain technology to send or receive money over the internet without the need for banks.
But the question “What can blockchain do more than just sending and receiving money?” changed the entire scenario of blockchain technology.
This led to the development of Ethereum, a technology that can run programs and not just transfer money.
After Ethereum came into use, many newer blockchains emerged that seemed to address Ethereum’s limitations, enabling financial services without banks, introducing unique digital ownership for various art forms, and even allowing users to own their digital identity rather than a platform controlling it.
While many are aware of the history of blockchain technology and cryptocurrencies, understanding where these assets are headed is equally important, as their present and future are shaped by technology, innovation, regulatory developments, and the growing adoption of AI across industries.
Why are wealth management firms increasingly investing in digital assets?
Institutional investors, family offices, and high-net-worth individuals are increasingly seeking exposure to digital assets as part of a diversified portfolio strategy.
- Evaluate blockchain projects
- Manage portfolio risk
- Execute trading strategies
- Monitor rapidly evolving markets
- Navigate regulatory requirements
Like any asset class, digital assets carry risks, including:
- Market volatility
- Regulatory uncertainty
- Cybersecurity threats
- Operational complexity
- Custody risks
However, they also offer several compelling advantages that continue to drive adoption.
The untold benefits behind the rise of digital asset adoption
Faster cross-border payments
When we think of sending money cross-border, the first thing that comes to mind is the complexity involved. But executing cross-border transactions is relatively quick when using digital assets. The reason is that digital assets operate on a decentralised network, so they do not require banks or other intermediaries to execute transactions. This also reduces the cost of digital asset transactions, and settlement takes just a matter of seconds.
In some cases, cross-border payments are delayed due to differing regulatory frameworks across countries.
Growing regulatory maturity
A decade ago, investing in cryptocurrencies and digital assets was often viewed as highly speculative due to:
- Frequent exchange failures
- Security breaches
- Limited investor protection
- Lack of regulatory oversight
Today, the landscape looks significantly different.
Major jurisdictions including:
- Australia
- United States
- United Kingdom
- European Union
- Singapore
- Japan
Have developed increasingly sophisticated regulatory and compliance frameworks for digital assets.
As a result, institutional participation has increased, licensed service providers have emerged, and investor confidence has improved.
24/7 markets
Digital assets have broken the market hours within which a traditional market functions. The decentralised nature of these assets enables them to operate 24/7. This allows investors to profit by utilising any global event that occurs at that time. It means you can invest in crypto at your leisure on a lazy Sunday afternoon.
So, the flexibility that digital assets offer ensures that a wealth manager can monitor the market 24/7, make investment decisions based on market volatility, and assist offshore investors at any time with any digital asset investment.
Fractional ownership of expensive assets
One of the most transformative applications of blockchain technology is asset tokenisation.
Consider a commercial property valued at $10 million.
Traditionally, investing in such an asset would require significant capital. Through tokenisation, the property can be divided into millions of digital tokens, each representing a fraction of ownership.
This creates opportunities for investors to:
- Invest smaller amounts
- Diversify across multiple assets
- Access previously inaccessible investment opportunities
- Benefit from potential rental income and capital appreciation
- Participate in tokenised ownership structures
Fractional ownership is expected to become a major driver of future digital asset adoption.
Improved settlement times
The concept of T+1 days or T+2 days doesn’t work for digital assets. When you buy a traditional asset, the order is placed, executed, and ownership is transferred from the seller to the buyer. This might take a minimum of T+1 days. For digital assets, the order placement, execution, and transfer of ownership are all handled by blockchain technology, reducing the time required for intermediary approval and completing the process within minutes.
This helps investors and wealth management firms access capital sooner, improve operational efficiency, and enable quick portfolio rebalancing. But not all digital assets settle instantly; it depends on the blockchain they run on.
Investment managers vs Fund administrators
Investment managers further reduce the risk of directly investing in crypto or other digital assets by investing in regulated funds managed by experienced fund managers.
While investment or fund managers focus on investment strategy and decision-making, all back-end fund administration work should be streamlined to ensure smoother handling of digital assets.
Every new asset class introduces new operational complexities.
While digital assets offer significant advantages, they also require a different operational framework and fund administration practices from those of traditional securities.
Need for specialised fund administration
We discussed how and why digital assets are increasingly adopted by wealth management firms and their benefits, but when it comes to fund administration, there are headwinds that pose operational challenges requiring specialised fund administration capabilities.
Where do fund administrators need help?
1. Portfolio accounting
Digital asset funds generate a variety of transaction types that require accurate accounting treatment, including:
- Purchases and sales
- Wallet transfers
- Staking rewards
- Token swaps
- Airdrops
- Yield-generating activities
Administrators must maintain complete and accurate records across all transactions.
2. Transaction reconciliation
Reconciling digital asset activity involves validating data across:
- Blockchain networks
- Exchanges
- Custodians
- Internal accounting systems
Ensuring consistency across multiple data sources is critical for operational integrity.
3. NAV calculation
Accurate Net Asset Value (NAV) calculation requires:
- Consistent valuation methodologies
- Reliable pricing sources
- Accurate asset positioning
- Portfolio-level aggregation
Given the volatility of digital assets, valuation accuracy is particularly important.
4. Pricing and valuation
Unlike traditional securities, digital assets may trade across multiple venues with varying levels of liquidity.
Administrators must address:
- Exchange price variations
- Thinly traded tokens
- Illiquid investments
- Valuation policies for emerging assets
5. Investor reporting
Investors increasingly demand transparency.
Fund administrators must provide timely reporting covering:
- Holdings
- Performance
- Transactions
- Valuations
- Portfolio composition
Clear reporting plays a crucial role in investor confidence.
6. Custody oversight
Digital asset custody introduces a completely different operating framework compared to traditional securities.
- Custodian records
- Wallet balances
- Asset transfers
- Security controls
Maintaining an accurate audit trail of asset movements is essential.
7. Regulatory and compliance reporting
With regulatory expectations evolving globally, administrators must support:
- AML and KYC requirements
- Regulatory filings
- Jurisdiction-specific reporting obligations
- Ongoing compliance monitoring
8. Audit support
Digital asset funds require detailed audit evidence.
Administrators must maintain:
- Transaction histories
- Wallet records
- Blockchain confirmations
- Valuation support documentation
This enables efficient audit and regulatory review processes.
9. Data management
Digital asset data originates from multiple sources, including:
- Blockchain networks
- Exchanges
- Custodians
- Pricing vendors
- Internal systems
Consolidating this information into a single source of truth is essential for operational efficiency.
10. Automation and technology integration
Digital asset administration demands extensive technology integration.
Leading administrators increasingly connect:
- Blockchain analytics platforms
- Pricing systems
- Custodians
- Fund accounting platforms
- Reporting tools
Automation reduces manual effort while improving accuracy and scalability.
The Future of Digital Asset Fund Administration
The future of digital asset investing depends not only on better investment decisions but also on a stronger operational foundation that enables wealth management firms to manage funds and assets efficiently.
As adoption grows, fund administrators who can combine traditional fund accounting expertise with blockchain capabilities and reliable operational support will play a crucial role in assisting the next generation of investment funds and their administration.
See how we helped a crypto-based fund administrator improve TAT and accuracy, enhance visibility, and add more funds to their portfolio while staying compliant.
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