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European Securities Watchdog Considers Inclusion of Crypto Assets in Investment Products
The European Union (EU) securities watchdog, the European Securities and Markets Authority (ESMA), is seeking input from stakeholders on the potential inclusion of crypto assets in investment products. This move could have a significant impact on the market for cryptocurrencies, potentially surpassing the scope of spot Bitcoin exchange-traded funds (ETFs).
Expanding Market Access with UCITS Approval
ESMA is looking to expand the assets eligible for Undertakings for Collective Investment in Transferable Securities (UCITS), a market currently valued at €12 trillion. Approval of crypto assets for UCITS could offer broader access to cryptocurrencies within this vast market.
Potential Market Impact
In the US, major players like BlackRock and Grayscale have already seen significant inflows of approximately $18 billion into funds since the beginning of the year, contributing to the Bitcoin rally in the first quarter of 2024. However, the approval of crypto assets for UCITS is not guaranteed, and ESMA is seeking stakeholder input until August 7 to gather perspectives and insights.
Advantages and Challenges
Andrea Pantaleo, a lawyer specializing in crypto regulation and litigation at DLA Piper, believes that the impact of including crypto assets in UCITS could be more substantial than that of US ETFs. One advantage of accessing UCITS for the crypto industry is the diverse investment categories it offers, allowing for different asset allocations based on risk profiles.
Despite the potential benefits, there are obstacles to overcome before crypto assets can be included in the UCITS framework. One significant challenge is custody, as regulations for depository banks need to align with the safekeeping and segregation rules for crypto assets under the Markets in Crypto-Assets regulation (MiCA) in the EU.
Regulatory Considerations and Future Outlook
ESMA is specifically seeking feedback on how the inclusion of specific cryptocurrencies in the UCITS framework would be affected by MiCA. While the process of updating the UCITS eligible assets rules is expected to be time-consuming and subject to negotiation, it signifies a step towards potential market evolution.
With recent regulatory developments like the anti-money laundering regulation (AMLR) in the EU and the growing adoption of cryptocurrencies in Western Europe, the landscape for crypto assets in investment products is evolving. As the EU continues to navigate these regulatory frameworks, the future of crypto assets in UCITS remains a topic of ongoing discussion and evaluation.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
