Family offices need to understand the risks before investing in decentralised finance and cryptocurrencies, DeFi industry leaders told the Wealth Today Summit in Dubai on Tuesday.
DeFi, which experts say is a more secure way of managing financial transactions as it relies on blockchain, is a viable alternative as the world quickly moves towards a digital world that requires safeguarding investor assets and portfolios, they said.
“From the financial institutions’ perspective, the challenge is to adopt DeFi in a way that keeps to their regulatory obligations to customers,” Wai-Lum Kwok, senior executive director for authorisation and FinTech at the Financial Services Regulatory Authority of Abu Dhabi Global Market, told The National.
“From the customers’ standpoint, they need to understand the risks before investing in the DeFi space.”
Family offices are private wealth management advisory firms that cater to ultra-high net worth individuals. They are distinct from traditional wealth management companies as they offer more holistic solutions, including insurance, tax services, wealth transfer and charitable giving.
More than 200 of the world’s single largest family offices cover a total net worth of around $493 billion, with individual families’ net worth averaging about $2.2bn, Swiss bank UBS said in a 2022 report on the sector.
However, family offices are not immune to the current economic environment. Soaring inflation and central banks’ moves to increase interest rates are forcing them to reconsider their strategies and asset allocations, UBS said.
They are reducing fixed-income allocations and sacrificing liquidity for returns, as they increase investments in private equity, real estate and private debt, it said.
“The risk of a further sell-off cannot be ruled out as tighter Federal Reserve expectations, the global sell-off in risk assets and the fact that the massive outflows in cryptocurrencies started showing some cracks in the freshly born crypto…
