A lack of security and custody standards in digital assets is the biggest barrier to increasing allocations among wealth managers and institutional investors, according to recent research from digital asset manager Nickel.

In a survey of over 200 institutional investment and wealth managers, 92% said they would increase allocations to digital assets if traditional financial firms adopted enhanced security and custody standards, with 32% saying they were very likely to raise allocations.

Nearly 90% said that high-profile hacks, failures, and DeFi exploits had significant impacts on their willingness to invest in digital assets. A further 46% identified cybersecurity or hacking risks as the biggest barrier to raising allocations.

By contrast, just 28% identified price volatility as the biggest barrier, while less than a quarter pointed to insufficient liquidity and lack of market depth.

Anatoly Crachilov, CEO at Nickel Digital, said that while the industry has come a long way in the past few years, there is still plenty to be done on security.

“Digital assets still have some way to go before custody and security standards consistently match those that investors expect from traditional prime brokers and custodians.”

This article first appeared in our sister publication, Portfolio Adviser.