ESMA Considers Incorporating Crypto into €12 Trillion Investment Market
Summary:
The European Securities and Markets Authority (ESMA) is seeking expert input on the possible inclusion of cryptocurrency in its €12 trillion investment product market. This move comes amidst a global warming up to cryptocurrency exposure in traditional investment mechanisms. While approval would not allow for independent crypto-centered investment products, it could mean the establishment of several funds with a certain proportion of crypto allocation within Undertakings for Collective Investment in Transferable Securities (UCITS).
Europe's regulatory body for securities and markets, the European Securities and Markets Authority (ESMA), is soliciting feedback from industry specialists about the feasibility of including cryptocurrency in the colossal €12 trillion ($12.8 trillion) investment products sector. ESMA is interested in knowing if Undertakings for Collective Investment in Transferable Securities (UCITS), a market of investment products worth €12 trillion, can be opened to several other asset categories such as structured/leveraged loans, emission allowances, catastrophe bonds, commodities, cyber assets, and unlisted shares.
UCITS consists of investment funds with products designed to secure and streamline investment operations. The composition of UCITS usually includes mutual funds, money market funds, or exchange-traded funds, all of which are subject to EU regulations. However, it's also accessible to investors beyond the EU. Stakeholders of UCITS have until August 7 to submit their views. If the proposal gets the green light, UCITS will rank as one of the major mainstream funds offering exposure to cryptocurrencies.
This move by the EU regulatory entity to consider incorporating cryptocurrency assets into securities investment funds happens at a time when Bitcoin exchange-traded funds are being accepted in the US and Hong Kong. Securities regulators globally are becoming more receptive to crypto exposure in conventional investment mechanisms.
While Bitcoin ETFs are solely focused on cryptocurrencies, UCITS investments encompass various fund types, all having a specific asset distribution depending on the risk profile of the fund. Consequently, even with approval, there won't be a standalone UCITS fund exclusively dedicated to crypto, but several UCITS funds may have a certain proportion of cryptocurrency. The current EU regulations do not allow independent cryptocurrency-based investment products, so investors can only access these through Exchange Traded Notes (ETNs).
Europe is recognized for its stringent regulatory approach to cryptocurrency, being one of the initial regions to establish a comprehensive regulatory framework for cryptocurrency assets, known as markets in crypto assets (MiCA). One of the queries posed by ESMA in its feedback seeks to know how introducing specific cryptocurrencies to this framework would affect or be influenced by MiCA.
Published At
5/9/2024 1:28:34 PM
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