Institutional investors are deepening their involvement in digital assets and emerging technologies such as blockchain and AI, according to a new State Street report — though many remain split on whether decentralized finance can ever fully blend with traditional markets.
The study found that digital assets currently make up about 7% of institutional portfolios, a figure expected to climb to 16% by 2028.
Most holdings are concentrated in digital cash (stablecoins) and tokenized versions of listed equities or fixed income, with respondents allocating about 1% of their portfolios to each and asset managers maintaining greater exposure.
While stablecoins and tokenized assets comprise the bulk of current holdings, cryptocurrencies have delivered the most substantial returns. Bitcoin topped the list for 27% of respondents as the best-performing asset, followed by Ethereum at 21%.
The report also noted that private assets remained the top bet to benefit first from tokenization, and that most institutions surveyed expect digital assets to become mainstream within the next decade; yet they remain cautious about how fast adoption will grow.
Just over half (52%) of respondents expect 10% to 24% of all investments by 2030 to be made through digital or tokenized instruments, while only 1% foresee most investments moving entirely onchain.
The survey, produced with Oxford Economics, polled over 300 institutional investors on how they’re using digital assets, AI and blockchain — and where they’re allocating capital next.
State Street Corporation provides institutional financial services. According to the company, as of June 30 it oversaw about $49 trillion in assets under custody or administration and $5.1 trillion under management across more than 100 markets.
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Digital transformation strategies: AI and blockchain
The study also shows that distributed ledger technology (DLT) and artificial intelligence are now critical to institutions’ digital transformation strategies.
Nearly all surveyed companies have launched or are planning strategies to use advanced and emerging technologies to automate processes, remove friction points and improve interoperability across business operations.
According to the report, 29% of respondents said blockchain is integral to their transformation plans. Many are also extending blockchain use beyond investment operations, applying it to cash flow management (61%), business data processes (60%) and legal or compliance functions (31%).
Institutions also increasingly see blockchain and generative AI as complementary foundations of a broader digital transformation strategy.
About half (45%) agreed that recent advances in generative AI will accelerate digital asset development, as GenAI tools can build smart contracts, blockchains and tokens more quickly, securely and cost-effectively.
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DeFi meets TradFi in transition
Despite growing confidence in digital assets, many companies doubt that blockchain-based systems will fully replace traditional trading and custody infrastructure.
Nearly half of respondents (43%) expect hybrid decentralized and traditional finance investment operations to become mainstream within five years, up from 11% a year ago.
However, 14% of respondents said they don’t believe digital investment systems will ever fully replace traditional trading and custody, up sharply from 3% in 2024.
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