The European Securities and Markets Authority (ESMA), an EU security watchdog, is seeking the input of experts on whether to incorporate cryptocurrency into the 12 trillion euro ($12.8 trillion) investment product market. The ESMA has requested the opinions of industry experts concerning the possibility of Undertakings for Collective Investment in Transferable Securities (UCITS), a market valued at 12 trillion euros, gaining exposure to various asset classes including structured or leveraged loans, catastrophe bonds, emission allowances, commodities, crypto assets, and unlisted equities.
UCITS are a category of investment funds that aim to protect and simplify investment transactions. They typically consist of mutual, exchange-traded, or money market funds. While these funds are governed by EU regulations, non-EU investors can also participate.
Stakeholders in UCITS have until August 7th to submit their comments. If approved, UCITS would become one of the largest mainstream investment funds with exposure to cryptocurrency.
This request for expert opinions comes at a time when spot Bitcoin (BTC) exchange-traded funds have been approved in the United States and Hong Kong. It appears that securities regulators worldwide are becoming more receptive to incorporating cryptocurrency exposure into traditional investment vehicles.
It is important to note that while spot BTC ETFs are solely focused on cryptocurrency, UCITS investments are divided into various fund types, each with a specific asset allocation based on the fund’s risk profile. If approved, there will not be an independent UCITS fund with a 100% allocation to cryptocurrency, but rather multiple UCITS funds with a percentage allocation to crypto.
Currently, EU regulations prohibit independent investment products centered around cryptocurrency, so investors must access them through exchange-traded notes.
The European Union is well-known for its stringent crypto regulatory policies. It was one of the first regions to introduce a comprehensive regulatory framework for cryptocurrencies through its Markets in Crypto-Assets Regulation (MiCA).
One of the questions posed by the ESMA in the feedback is how the addition of specific cryptocurrencies to the framework would be impacted by MiCA.
Magazine: What is the role of crypto market makers? Providing liquidity or engaging in manipulation?