Barriers for institutional investors to invest in digital financial assets

Abstract

Subject. The article analyzes barriers to active involvement of institutional investors' funds in digital DFA in the Russian financial market. Objectives. The study aims at identification of the main barriers preventing the active involvement of institutional investors' funds in DFA, development of recommendations for their elimination. Methods. The study employs general scientific methods of research, logical, comparative, and statistical analysis to review foreign practice and academic publications of domestic and foreign authors. Results. We revealed three main groups of barriers. They are legal and regulatory barriers; low volume of the primary market and insufficient liquidity in the secondary market; low level of financial literacy and problems of understanding DFA by private investors. To eliminate them, we offer to amend a number of federal laws to allow institutional investors to include DFA in their investment strategies and portfolios. The problem of low liquidity of the secondary market can be solved by including the main Russian trading platforms in the register of DFA exchange operators of the Bank of Russia, and providing private investors' access to these transactions. Conclusions. It is crucial to develop a risk rating system for DFA and criteria for DFA inclusion in the portfolios of institutional investors.