Crypto brokerage FalconX bets risk-hungry millennials will unlock $41bn in Asian family wealth

Wealthy families in Singapore, Hong Kong, and other Asian locales are increasingly interested in adding cryptocurrencies to their portfolios.

But the money managers handling their wealth are less enthusiastic.

Even in the Bitcoin exchange-traded fund era, money managers for the super-rich remain wary of digital assets due to their lack of transparency and regulatory challenges.

Matt Long, general manager APAC at FalconX, a prime brokerage for digital assets, aims to change that. And he’s counting on millennials and Gen Z and their “cultural appetite” for market risk to deliver.

“We’re seeing the wealth move from the previous generation down into the next generation, who will be managing the money,” Long told DL News over coffee and muffins at The American Club in Hong Kong.

Around $2.5 trillion in intergeneration wealth will change hands in Asia by 2030, according to Wealth-X, a research firm. Family offices manage more than $41 billion in the Asia-Pacific region, according to a survey conducted by Campden FB, a research outfit.

Quest for liquidity

FalconX caters to family offices and other institutional investors. It has executed more than $1 trillion in cumulative trades in digital assets since it went live in 2018.

In its quest for liquidity, FalconX is eyeing a generational shift as younger, digitally savvy heirs take a keen interest in blockchain assets as they inherit family fortunes.

“That’s going to be an ongoing trend as we see this intergenerational transfer of wealth in Asian families,” he said.

The Asia-Pacific is set to surpass North America and become the largest regional wealth hub by 2026, according to global real estate consultants Knight Frank.

But older generations are also starting to transfer asset management to younger generations.

The Asia Pacific accounts for 42% of the $15 trillion in global wealth expected to be transferred to the younger generations in the next ten years, according to Deutsche Bank.

Kamran Azim, chief operating officer of RBC Wealth Management Asia, described the trend as “the greatest generational wealth transfer in history” in The Financial Times.

But the shift may be driven largely by different attitudes toward investing these assets.

‘The way that capital forms in Hong Kong and Asia is very different to how capital forms in the US.’

Matt Long, FalconX

Long said Hong Kong is a well-established market for high net worth families, many of which have a growing interest in including digital assets in their portfolio.

“The way that capital forms in Hong Kong and Asia is very different to how capital forms in the US,” he said “There are many more hedge funds and asset managers in the US, whereas in Hong Kong and Asia, there are many more family offices and family money.”

Home of innovation

Though he’s now based in Singapore, Long was longtime Hong Kong resident. He is one of many business and finance professionals who have left Hong Kong for Singapore and Dubai in recent years.

Even so, he says there’s still an opportunity in Hong Kong, which he called the “home of innovation for digital assets.”

“A lot of innovative products came out of Hong Kong. Perpetual futures came out of Hong Kong,” he said, referring to a type of crypto derivative.

Long also said the advent of Bitcoin ETFs in the US is bound to stoke demand for similar products in Asia.

The city has created a proactive regulatory environment and there is significant interest from prospective issuers, Long noted.

“There will be many issuers that will seek to do it,” Long said. “Like all assets, there will probably be one or two major leaders that accumulate most of the assets.”

It’s not clear how long the approval process will take in Hong Kong. Yet some Asian nations have already rejected the idea of Bitcoin ETFs.

For example, Singapore’s central bank has issued a statement saying that digital asset ETFs were not suitable for retail investors.

Clarity and definition

Others, such as South Korea, have flip-flopped on their stance. Similar to Singapore, regulators initially expressed reservations.

But in the run up to the South Korean election in April, both of the main political parties have said they are interested in allowing spot Bitcoin ETFs.

The ETFs will also allow high net-worth investors to invest in cryptocurrency without the need to hold it themselves.

Bringing it under Hong Kong regulations, along with other plans by the government to regulate stablecoins and over-the-counter trading will help increase confidence in Hong Kong as a crypto market.

“Clarity and definition brings certainty and therefore brings capital,” said Long.

Callan Quinn is DL News’ Asia Correspondent. Get in touch at callan@dlnews.com.