The European Union’s security watchdog, the European Securities and Markets Authority (ESMA), has sought the opinion of industry experts on the possibility of incorporating cryptocurrencies into the 12 trillion euro ($12.8 trillion) investment product market.
ESMA has asked these experts to weigh in on whether Undertakings for Collective Investment in Transferable Securities (UCITS), an investment product market valued at 12 trillion euros, can gain exposure to various asset classes, including structured/leveraged loans, catastrophe bonds, emission allowances, commodities, cryptocurrencies, and unlisted equities.
UCITS is a class of investment funds designed to protect and simplify investing transactions. These funds, which can include mutual, exchange-traded, or money market funds, are governed by EU regulations, although non-EU investors can also gain exposure.
UCITS stakeholders have until August 7 to submit their comments. If approved, UCITS would become one of the largest mainstream funds with cryptocurrency exposure, following the approval of Bitcoin (BTC) exchange-traded funds in the United States and Hong Kong, as securities regulators worldwide become more open to incorporating crypto assets into traditional investment vehicles.
While BTC ETFs are solely crypto-focused, UCITS investments are divided into numerous fund types, each with a particular asset allocation based on the fund’s risk profile. This means that even if approved, there won’t be an independent UCITS fund with 100% crypto allocations, but rather multiple UICTS funds with a certain percentage of crypto allocation.
Currently, EU regulations prohibit independent crypto-centered investment products, requiring investors to access them via ETNs (Exchange Traded Notes).
Europe is known for its strict crypto regulatory policy, being one of the first regions to introduce a comprehensive crypto regulatory framework in the form of the markets in crypto assets (MiCA) regulation. One of the questions asked by ESMA in the feedback is how the addition of specific cryptocurrencies to the framework would or wouldn’t be affected by MiCA.
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