The shift of digital assets from fringe to mainstream

Cryptocurrencies and digital assets are among the fastest growing areas of finance, increasingly in demand from both private and institutional investors.

The total market size of cryptocurrencies alone is more than $2.5 trillion¹ – comparable to the GDP of a country like Italy. This represents a remarkable turnaround from the 2022 downturn, although still slightly below the sector's 2021 peak valuation.

While the market size is still small compared to equities and bonds issued in traditional formats, the projected growth trajectory of digital assets suggests they are becoming an important part of the mix for investor portfolios.

“At HSBC, we view digital assets, such as digitally native bonds, as a mainstream subject – because our clients see it that way,” says John O'Neill, Group Head of Digital Assets and Currencies, HSBC.

Digital assets, stablecoins and the tokenisation of assets (like bonds and money market funds) are breaking new ground, according to a panel discussion that took place during the HSBC Global Investment Summit at the end of March this year.

O’Neill was joined by Lucy Gazmararian, Founder and Managing Partner, Token Bay Capital; Emma Pecenicic, Head of Digital Propositions and Partnerships, Asia Pacific ex-Japan, Fidelity International; and Darryl CHAN, Deputy Chief Executive, Hong Kong Monetary Authority.

The panel discussed how the integration of digital assets into mainstream finance will likely depend on several factors: regulatory clarity, balancing innovation with investor protection, robust market infrastructure to support institutional participation, and demonstrable improvements in efficiency compared to existing systems.

Changes to regulatory frameworks in major economies have arguably transformed the sector over the past year, and these changes seem set to accelerate.

Policy changes in the US and Hong Kong are both relevant. Hong Kong’s Securities and Futures Commission has set out a roadmap to enhance the growth of digital (or virtual) assets, while the US administration has made highly supportive announcements about digital assets, cryptocurrencies and stablecoins.

The impact of spot bitcoin ETFs launched in the US in 2024 was “profound,” O’Neill added, with leading providers experiencing large volumes and many attributing price rises – in part – to this development.

Regulatory support

The US administration also issued executive orders in the first few months of 2025, calling for leadership in digital assets and for the establishment of a Strategic Bitcoin Reserve and a United States Digital Asset Stockpile. Although many details still need to be confirmed, our panel agreed that these were significant developments.

“For the crypto industry, this is momentous,” said Gazmararian. “This is arguably the second most important event in crypto since Satoshi Nakamoto’s White Paper. The US government has now said that bitcoin is a strategic asset.”

But to achieve its ambitions, the US will need to deliver legislation that structures the market and controls risks for consumers, while also determining which regulators will oversee what kind of assets. The complexity of this task should not be underestimated, as it requires balancing innovation with investor protection in a rapidly evolving technological landscape.

The panel noted that stablecoin legislation in the US is currently under consideration by Congress, which could result in a boost to this market. Stablecoins reached a market capitalisation of more than USD200 billion last year² and if banks issue their own, that could increase to trillions in the next few years, Gazmararian predicted.

Asset management engagement

Some 65% of institutional investors plan to buy or invest in digital assets in the future, according to a recent survey³, and more than one-quarter feel their perception of digital assets changed positively over the past year.

Major asset managers are increasing their offerings in the digital asset space. Their participation is crucial for providing the liquidity and infrastructure needed for broader institutional adoption. Fidelity, for example, wants to connect traditional finance with digital finance.

The potential of tokenisation

Tokenisation holds the promise of making bond issuances more transparent and efficient. Traditional bond trades often take several days to settle; digital formats can reduce this materially.

BlackRock launched its USD Institutional Digital Liquidity Fund on the ethereum blockchain in 2024, which has surpassed $500 million in market value, making it the highest-valued tokenised treasury fund in the world.⁴

Hong Kong is becoming a major digital assets hub, having facilitated the launch of digital bonds and tokenised gold. In 2024, HSBC helped the Hong Kong Monetary Authority (HKMA) complete a HKD6 billion-equivalent digitally native green bond issuance. A digital bond grant scheme has also been launched to support these efforts.

The panel at the HSBC Global Investment Summit agreed that widespread collateralisation was an important next step for market development.

These developments all demonstrate blockchain's potential to improve efficiency in financial markets, further helping to push digital assets into the mainstream.