What limitation is typically associated with synthetic assets?

Synthetic assets are typically financial instruments that mimic the behavior of other assets without requiring ownership of the underlying asset. One of the notable limitations associated with synthetic assets is that they often lack the same regulatory protections as traditional assets.

This means that the regulatory framework governing synthetic assets may be less comprehensive, leading to increased risks for investors. For instance, traditional assets, such as stocks and bonds, benefit from consumer protection laws, securities regulations, and established market practices that aim to safeguard investors' interests. In contrast, many synthetic assets operate in a less regulated environment, which can expose investors to higher risks of fraud, lack of transparency, and inadequate recourse in the event of a dispute.

The other options present various aspects that do not accurately describe the typical limitations associated with synthetic assets. Synthetic assets can be created for a wide range of investors, not just institutional ones. They do not require physical storage as traditional assets do; they are purely digital contracts. Additionally, synthetic assets can indeed be traded on decentralized platforms, which is a significant feature that distinguishes them from traditional assets.