Over half of Japanese institutional investors are planning to invest in digital assets within the next three years, according to a survey conducted by Nomura Holdings and its digital asset subsidiary, Laser Digital. The survey, which polled over 500 investment managers from institutions, family offices, and public-service corporations in Japan, reveals a growing appetite for crypto assets among traditional financial players.

The survey results indicate that 54% of respondents intend to invest in crypto assets over the next three years, with 25% reporting a positive impression of crypto assets and 62% viewing them as a diversification opportunity. The preferred allocation to digital assets was between 2%-5% of assets under management (AUM), and nearly 80% said they would invest over a year.

The development of new products could boost investment in digital assets. For those already involved in cryptocurrencies or those debating investing in digital assets, the main driver for future investment was the development of new products including exchange-traded funds (ETFs), investment trusts, and staking and lending offerings.

The survey showed that about half of respondents would like to invest directly in Web3 projects or via venture capital funds. However, barriers to entry are preventing some managers from investing in digital assets. These barriers include counterparty risk, high volatility, and regulatory requirements.

The survey was conducted following the Japanese cabinet's approval of a proposal in February to add crypto to the list of assets that local investment limited partnerships are allowed to acquire or hold. The revision to the Limited Partnerships Act is expected later this year, Nomura said in a separate statement on Monday.

Japan is rapidly developing an economic reform bill with notable implications for the crypto industry. Early this year, the government published a legislative proposal that allows venture capital firms and other investment funds to hold digital assets directly. The inclusion of digital assets in the legal framework not only legitimizes their use in institutional investments but also places the nation as a crypto-friendly jurisdiction globally.