DRIFT Drift

+0.00%

Crypto investors shift toward SMAs as custody concerns grow

By TheStreet Roundtable

12 days ago

DRIFT

DEFI

WHEN

USDC

GMIX

Send

The way investors approach crypto is changing.

With global digital asset ownership now exceeding $4 trillion, more investors are moving beyond short-term trading and beginning to treat crypto as a long-term portfolio allocation.

That shift is putting pressure on how assets are held, managed and structured — areas that have traditionally been dominated by established practices in traditional finance.

One structure now gaining attention is the separately managed account, or SMA.

A growing demand for control over assets

Recent years have pushed custody to the forefront of investor concerns. The collapse of FTX exposed the risks tied to pooled platforms, particularly when users lose access to private keys or rely entirely on intermediaries for withdrawals.

That experience has changed expectations. Investors are increasingly looking for setups that give them clear ownership of their assets, rather than exposure through a platform.

Data reflects that shift. In 2025, 16% of crypto owners reported access problems — a signal that concerns around custody and control are not isolated incidents but part of a broader issue.

At the same time, trust remains fragile. Around 10% of crypto holders in 2025 identified difficulty trusting exchanges as their biggest concern.

Where SMAs fit in

SMAs are positioned between two familiar models.

On one side is exchange custody, where platforms manage assets and handle execution. On the other is self-custody, where individuals control assets directly through personal wallets. Each comes with tradeoffs — convenience versus responsibility.

SMAs aim to balance those extremes.

They are structured to provide clients with beneficial ownership and segregated exposure to specific assets, subject to applicable custody arrangements. Assets can be titled directly to the client or a trust, while managers operate within predefined permissions. This setup allows investors to retain ownership while delegating execution.

Customization is another feature. SMAs allow for tailored portfolio construction, tax-loss harvesting and more precise control over how assets are managed.

How SMAs move from TradFi to crypto

The concept itself is not new. SMAs are widely used in traditional finance and corporate custody, particularly among institutional investors who require transparency and clear asset ownership.

Their entry into crypto follows a similar logic.

As more real-world assets move onchain — spanning securities, real estate and other asset classes — SMAs are increasingly seen not just as a custody solution, but as part of the infrastructure needed to support that transition.

They also address risks associated with exchange-based custody, including commingled balances and counterparty exposure. By keeping assets segregated and held in the client’s name, SMAs are designed to reduce the likelihood of misuse.

That said, they do not eliminate risk. Market volatility, liquidity constraints, counterparty exposure and operational risks tied to digital asset infrastructure remain part of the equation.

Institutional requirements drive adoption

The rise of SMAs is closely linked to institutional participation.

Registered investment advisers, family offices and hedge funds — the core client base Abra serves — typically require segregated custody, verifiable ownership and professional oversight before allocating capital to digital assets.

SMAs meet those requirements.

They also introduce a different cost structure. While management fees apply, clients gain direct exposure to underlying assets. Yield strategies can be layered on top, potentially offsetting those fees over time.

Compared to ETFs, which may include multiple layers of costs, SMAs can offer a more direct link to asset performance once fees and net asset value differences are considered.

Addressing a long-standing tradeoff

One of crypto’s ongoing challenges has been balancing usability with true ownership.

Exchange platforms offer ease of access but concentrate control. Self-custody gives full control but adds operational complexity. SMAs are designed to sit between those models, offering managed access without giving up ownership.

They also introduce a level of transparency that some investors have been seeking. Instead of relying solely on platform reporting, clients can independently verify their holdings.

Recent events have reinforced why that matters. The roughly $270 million exploit on Drift highlighted how quickly pooled systems can fail, freezing withdrawals and exposing user funds when vulnerabilities appear.

SMAs, by design, keep assets separate and directly assigned, aiming to limit that kind of exposure.

Abra’s role in the space

Abra is one of the firms building around this model.

The company offers a full-service SMA platform that includes model portfolios, qualified custody, digital asset trading, yield strategies and collateralized borrowing. The structure is built to align with the expectations of professional investors.

Among its offerings is USDAF, a dollar-yield strategy that bridges client USD or USDC into delta-neutral DeFi yield strategies seeking to generate additional yield. Returns are not guaranteed and remain subject to market and protocol risks.

A shift toward long-term infrastructure

The emergence of SMAs reflects a broader transition in crypto markets.

As the industry matures, the focus is moving away from pure trading activity toward portfolio construction, custody and long-term capital allocation. Structures that combine security, control and professional management are becoming more relevant as institutional participation grows.

SMAs bring those elements together, positioning themselves as a potential framework for how digital assets are held and managed going forward.

Whether they become a standard approach will depend on adoption, but they point to a clear direction: a market that is increasingly shaped by how assets are owned, not just how they are traded.