Blog 4

Institutional investors are steadily bolstering their portfolios with equity in blockchain-focused companies as the technology becomes more ubiquitous and as financial institutions face the global transition to digital assets.

Some of the world’s largest institutions—including private equity, asset managers, and venture capital firms—are taking on stakes in blockchain companies and amassing stockpiles of cryptocurrency.

Private equity firms KKR, Hamilton Lane, and Partners Group have all recently entered into blockchain agreements with technology companies as the firms look to make progress towards democratizing the private markets.

Global blockchain and cryptocurrency investments with PE and VC involvement since 2018 ($B)

The partnerships are aimed at broadening the investor base that can participate in private investing, which has historically been limited to institutional investors and high-and ultra-high-net-worth individuals.

KKR is the most recent private equity firm to complete a deal to open up private equity investing through blockchain technology, partnering with digital asset securities firm Securitize to create a tokenized fund that would allow access to KKR’s Health Care Strategic Growth Fund. The fund would be made available for individuals or family businesses with portfolios of $5 million or more, according to Barron’s.

Blockchain investment activity by vertical

For readers new to the topic, blockchain is a distributed ledger technology that keeps track of transactions and cannot be changed or altered.  

Similar to a power grid, which is comprised of power stations, substations, and various distribution points, all of which work together to provide electricity, blockchain technology works similarly; comprised of nodes, software systems (cloud-based and hardware-based), all of which make up the core infrastructure required to operate what we now know today as decentralized finance AKA “de-fi.”

Blockchains are usually managed on peer-to-peer computer networks, where nodes collectively obey a consensus algorithm protocol in order to add and validate new blocks of information. This requires software systems and solutions to communicate with one another to reach an agreement on whatever data is needed to complete that computation. Some real-life applications that require consensus include cloud computing, control of unmanned aerial vehicles (also referred to as UAVs), and power grids.

Hundreds of private equity firms have also acquired cryptocurrency. At least 253 multinational PE firms surveyed have purchased and used cryptocurrencies, according to a 2021 report by The North American Journal of Economics and Finance. The report also suggested that “cryptocurrencies with high familiarity and trust can be well-suited in institutional investors’ portfolios.”

Venture Capital firms are also deep in the blockchain investment space. Coinbase’s VC firm Coinbase Ventures is the top blockchain and cryptocurrency investor in the world, according to PitchBook, having completed 254 deals in the space as of June. The next largest VC investor, Digital Currency Group, has completed 223 deals in the space.

Linqto offers equity in several blockchain infrastructure companies exclusive to its members. Among these options is PolySign, which we recently welcomed back to our platform. PolySign is a developer of state-of-the-art, secure, scalable infrastructure that enables financial institutions to secure and transact digital assets across the capital markets and payments sectors.

Alongside PolySign, we offer equity in other blockchain companies including Blockdaemon—a blockchain company that provides node infrastructure to transact, stake, scale, and deploy nodes with institutional-grade security and monitoring—Figment—a blockchain infrastructure and crypto staking provider—Ripple—a global real-time payment system—Dapper Labs—a marketplace that offers digital collectibles built on the blockchain—and other companies.