The European Union security watchdog, the European Securities and Markets Authority (ESMA), is considering the addition of crypto assets to the 12 trillion euro investment product market, and is seeking the opinion of experts on the matter.
The ESMA has reached out to industry experts to gather their views on whether Undertakings for Collective Investment in Transferable Securities (UCITS) can include exposure to various asset classes, including crypto assets. UCITS are investment funds designed to simplify investing transactions and are governed by EU regulations.
Stakeholders have until Aug. 7 to submit their comments on the potential inclusion of crypto assets in UCITS funds. If approved, UCITS would become one of the largest mainstream funds with crypto exposure.
This move comes at a time when spot Bitcoin exchange-traded funds are gaining approval in the United States and Hong Kong, indicating a growing acceptance of crypto exposure in traditional investment vehicles.
While spot BTC ETFs are solely focused on crypto, UCITS investments are diversified across various fund types with different asset allocations based on risk profiles. If approved, there would not be a standalone UCITS fund with 100% crypto allocation, but rather multiple funds with a percentage allocation in crypto.
Nicolas Streschinsky, Head of DeFi at Trilitech, believes that including a small percentage of crypto assets in UCITS funds could broaden the holder base of cryptocurrency assets, particularly utility tokens used for transaction fees on major blockchains.
Currently, EU regulations prohibit independent crypto-centered investment products, requiring investors to access them through exchange-traded notes. The ESMA is also seeking feedback on how adding specific cryptocurrencies to the framework would be impacted by the Markets in Crypto-Assets Regulation (MiCA).
The European Union’s strict crypto regulatory policy has positioned it as a leader in the space, with MiCA providing a comprehensive regulatory framework for crypto assets. The potential inclusion of crypto assets in UCITS funds could signal a significant shift in the investment landscape within the EU.