State Street Bank Report: Institutional Digital Asset Allocation Ratio Will Double to 16% by 2028!

State Street Bank, in collaboration with the Oxford Economics Institute, surveyed 300 institutional investors, revealing that the allocation of institutional digital assets will soar from the current 7% to 16% by 2028, doubling in growth. Stablecoins and tokenized assets are becoming mainstream, with 52% of respondents predicting that by 2030, 10-24% of investments will be conducted through Blockchain.

State Street Bank's Major Data: Institutional Digital Asset Allocation Ratio Doubles in Three Years

(Source: State Street Bank)

The latest global institutional investor survey report released by State Street Bank reveals a trend that could change the landscape of the asset management industry. According to this survey conducted in collaboration with the Oxford Economics Institute, covering over 300 institutional investors, digital assets currently account for about 7% of institutional portfolios, and this figure is expected to rise to 16% by 2028. This means that in just three years, the proportion of institutional digital asset allocation will double, showing that traditional financial institutions' attitudes toward Blockchain and cryptocurrencies are undergoing a fundamental shift.

The importance of this discovery should not be underestimated. State Street Bank is a leading global provider of institutional financial services, with approximately $49 trillion in assets under custody or management as of June 30 of this year, and a total of $5.1 trillion in assets under management, serving over 100 markets. When such a financial giant managing astronomical assets releases predictions regarding the allocation of institutional digital assets, it not only reflects the true intentions of its clients but may also have a demonstration effect on the entire industry.

The growth trajectory from 7% to 16% suggests that a significant amount of traditional capital will flow into the digital asset space within the next three years. Taking the $5.1 trillion in assets managed by State Street Bank as an example, a 7% allocation means approximately $357 billion has already been invested in digital assets, while the 16% target implies that this figure will rise to about $816 billion, with an incremental increase of $459 billion. Such a scale of capital inflow is sufficient to have a profound impact on the cryptocurrency market and the Blockchain industry.

It is worth noting that the growth forecast for the digital asset allocation ratio of these institutions is not an isolated phenomenon, but is based on changes that have already occurred. Surveys show that nearly all surveyed institutions have initiated or are planning to develop strategies to utilize advanced and emerging technologies to achieve process automation, eliminate friction points, and enhance interoperability across their business operations. This indicates that institutional investors' acceptance of digital assets is not a passive trend-following behavior, but is based on recognition of the value of technology and strategic thinking.

Structural Analysis of Institutional Digital Asset Allocation: Stablecoins and Tokenization Lead the Way

A deep analysis of the institutional digital asset allocation ratios revealed in the State Street Bank report shows an interesting phenomenon: the preferences of institutional investors are not evenly distributed across all digital asset categories, but instead exhibit clear structural characteristics. Currently, the areas with the highest concentration of institutional holdings are digital cash (stablecoin) and tokenized versions of listed stocks or fixed income, with respondents allocating about 1% of their portfolios to each asset, while asset managers maintain greater exposure.

Stablecoins have become an important component in the asset allocation ratio of institutional digital assets, and there is a clear logic behind this. Stablecoins provide the technological advantages of cryptocurrencies (instant settlement, global accessibility, transparency) while avoiding the risk of price volatility, making them an ideal entry choice for institutional investors who require predictability and risk management. Institutions can use stablecoins for efficient cross-border payments, clearing settlements, and liquidity management without having to bear the price risks associated with cryptocurrencies like Bitcoin or Ethereum.

Tokenized assets are also favored by institutions, as they combine the familiarity of traditional financial assets with the efficiency of Blockchain technology. When traditional assets such as stocks, bonds, or real estate are tokenized, they can enjoy advantages like 24/7 trading, fractional ownership, lower transaction costs, and faster settlement speeds. For institutional investors accustomed to traditional asset classes, tokenized assets provide a relatively smooth transition path, allowing them to enjoy the benefits of Blockchain technology while maintaining their investment logic regarding familiar assets.

The report specifically points out that private assets are considered the earliest asset class to benefit from tokenization. This judgment has profound insights. Traditionally, private assets such as private equity, private debt, real estate, and infrastructure face issues like poor liquidity, high investment thresholds, and low transparency. Tokenization can break these assets into smaller shares, lowering investment thresholds; trade in the secondary market, increasing liquidity; and leverage the transparency of blockchain to enhance the level of information disclosure. These improvements are highly attractive for institutional investors looking to expand their allocation to private assets but constrained by traditional limitations.

However, the report also reveals the cautious attitude of institutional investors when increasing their allocation to digital assets. Although stablecoins and tokenized assets account for the majority of current holdings, when asked which asset performs best, the answer points to more volatile cryptocurrencies. 27% of respondents believe Bitcoin is the best-performing asset, followed by Ethereum at 21%. This gap between perception and actual allocation reflects the struggle institutions face in balancing the pursuit of returns with risk control.

2030 Vision: 10-24% of investments will be conducted through digital tools

The State Street Bank report not only focuses on the target allocation ratio of institutional digital assets for 2028 but also extends its vision to 2030, outlining a longer-term yet equally compelling scenario. More than half (52%) of the surveyed institutions anticipate that by 2030, 10% to 24% of all investments will be conducted through digital or tokenized instruments. Although this forecast has a wide range, even taking the lower limit implies that digitization will become an important component of institutional investment activities.

This 10-24% range is worth a deep analysis. If the upper limit of 24% is achieved, it means that by 2030, nearly a quarter of institutional investments will be conducted in digital form, marking a historic turning point for the financial industry. Considering that the global institutional asset management scale is measured in tens of trillions of dollars, a 24% digitization ratio represents trillions of dollars in assets operating on the Blockchain. Such a scale of transformation will drive the upgrade of the entire financial infrastructure, requiring transaction systems, custody services, and regulatory frameworks to adapt to the new technological environment.

However, the report also shows that institutional investors remain highly cautious about the prospects of fully on-chain investments. Only 1% of respondents expect most investments to be conducted entirely on-chain. This extremely low percentage reveals an important fact: despite institutional investors embracing digital assets and Blockchain technology, they hold a reserved attitude towards the vision of complete decentralization. Most institutions seem to prefer a hybrid model that leverages the technological advantages of Blockchain while retaining certain characteristics of the traditional financial system, such as centralized custody, regulatory compliance, and legal recourse.

This cautious attitude is further confirmed by another piece of data. Nearly half of the respondents (43%) expect that a mix of decentralized and traditional financial investment businesses will become mainstream within five years, a significant rise from 11% a year ago. This rise reflects the evolution of institutional investors' thinking: from a year ago, when many were still observing or questioning, to now, when an increasing number believe that a mixed model is the most viable path. This mixed model will allow institutions to maintain their connection and reliance on the traditional financial system while enjoying the efficiency of Blockchain.

What is even more intriguing is that 14% of respondents expressed skepticism about digital investment systems completely replacing traditional trading and custody, a significant increase from 3% in 2024. This change seems to contradict the overall rising trend of institutional digital asset allocation, but it actually reflects a deeper understanding among institutional investors in this field. As more institutions actively engage in digital asset investments, they are beginning to realize the practical challenges faced by complete decentralization, including regulatory uncertainty, technological risks, liquidity constraints, and operational complexities. Therefore, while they are increasing their digital asset allocations, their outlook on the possibility of completely replacing traditional systems has become more realistic and cautious.

Blockchain and Artificial Intelligence: The Dual Engines of Institutional Digital Transformation

(Source: State Street Bank)

Another important finding from the State Street Bank report is that institutional investors not only view digital assets as investment targets but also see Blockchain and artificial intelligence as key technologies driving overall digital transformation. 29% of respondents indicated that Blockchain is an indispensable part of their transformation plans, and many institutions have expanded the applications of Blockchain beyond investment operations.

The application scope of Blockchain in non-investment areas is impressive. 61% of the surveyed institutions use Blockchain for cash flow management, indicating that the value of distributed ledger technology in improving payment efficiency, reducing cross-border transfer costs, and enhancing the transparency of fund flow has been widely recognized. 60% of institutions apply Blockchain to business data processes, leveraging its immutable and traceable characteristics to improve data integrity and audit efficiency. Even 31% of institutions use Blockchain for legal or compliance functions, traditionally considered the most conservative and cautious areas.

The synergistic effects of artificial intelligence and blockchain are beginning to emerge. About half (45%) of the respondents agree that the latest advancements in generative artificial intelligence will accelerate the development of digital assets, as GenAI tools can establish smart contracts, blockchains, and tokens more quickly, securely, and cost-effectively. This perspective reveals an important trend: technological convergence is creating new possibilities. AI can automate the writing and auditing of smart contracts, reducing development costs and security risks; it can optimize the operational efficiency of blockchain networks; and it can provide smarter investment analysis and risk management tools.

This technological integration acts as a catalyst for the rise in the proportion of institutional digital asset allocation. As AI tools lower the technical barriers to participating in the blockchain ecosystem, more institutions will be able to develop and deploy digital asset solutions. At the same time, the enhanced analytics and risk management capabilities provided by AI also give institutions more confidence in increasing their digital asset allocation. It is foreseeable that in the coming years, the dual driving force of AI and blockchain will become an important force in pushing the proportion of institutional digital asset allocation from 7% to 16% or even higher.

Institutions view Blockchain and AI as "a complementary foundation for a broader digital transformation strategy," which is also noteworthy. This means that digital asset investment is not an isolated asset allocation decision, but rather a part of the overall digitization strategy. As institutions upgrade their technological infrastructure, optimize business processes, and redesign customer experiences, investing in digital assets becomes a natural extension of this transformation. This holistic perspective may make the proportion of institutional digital asset allocations more sustainable and solid, as it is built on deep organizational change and technological capability development, rather than mere speculation or following trends.

The Future of DeFi and TradFi: Integration Rather Than Replacement

The most subtle yet perhaps the most important insight revealed in the State Street Bank report is the perspective of institutional investors on the relationship between decentralized finance (DeFi) and traditional finance (TradFi). Although the allocation of institutional digital assets continues to rise, most respondents do not believe that DeFi will completely replace the traditional financial system; rather, they expect both to coexist in the long term and gradually integrate.

This integrated vision is reflected on multiple levels. First is the infrastructure level, where institutions expect the emergence of hybrid platforms that can seamlessly connect on-chain and off-chain assets. These platforms will allow investors to manage traditional securities and tokenized assets within a single interface, enabling conversion between the two forms when needed. Second is the regulatory level, as regulations such as the GENIUS Act come into effect, the number of regulated digital asset products will increase, blurring the lines between DeFi and TradFi.

Third, at the product level, we have already seen the emergence of hybrid products, such as regulated stablecoins, tokenized traditional securities, and ETF products connected to DeFi protocols. These products enjoy the technological advantages of Blockchain while complying with the regulatory requirements and risk management standards of traditional finance. Fourth, at the organizational level, an increasing number of traditional financial institutions are establishing digital asset departments or forming partnerships with Blockchain companies, while cryptocurrency native companies are also seeking traditional financial licenses and collaborations with banks.

This integration trend is crucial for understanding the future direction of institutional digital asset allocation. The target of 16% for 2028 is not a victory of DeFi over TradFi, but a sign of the deepening integration of both. Institutional investors seek an optimal combination: the efficiency, transparency, and innovative capability of Blockchain, coupled with the regulatory compliance, risk management, and legal certainty of traditional finance. Only when this integration reaches a sufficiently mature level will institutions be comfortable significantly increasing their digital asset allocation.

From this perspective, those pure DeFi projects may need to adjust their strategies. If institutional funding is the primary source of future growth, and what institutions need are regulated, auditable, legally enforceable products, then an overemphasis on decentralization and censorship resistance may limit these projects' ability to attract institutional funding. On the contrary, those projects that can find a balance between decentralized ideals and regulatory realities may become the primary beneficiaries of the increase in institutional digital asset allocations.