The European Securities and Markets Authority (ESMA), the security watchdog of the European Union (EU), is seeking expert opinions on the potential inclusion of cryptocurrencies in the 12 trillion euro ($12.8 trillion) investment product market.
The ESMA has reached out to industry experts for their views on whether Undertakings for Collective Investment in Transferable Securities (UCITS), a market valued at 12 trillion euros, can be exposed to various asset classes such as structured or leveraged loans, catastrophe bonds, emission allowances, commodities, crypto assets, and unlisted equities.
UCITS are a type 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 regulated by EU laws, non-EU investors can also participate.
Those involved in UCITS have until August 7 to submit their comments. If approved, UCITS would become one of the largest mainstream funds to have exposure to cryptocurrencies.
This request for expert opinions follows the recent approval of spot Bitcoin (BTC) exchange-traded funds in the United States and Hong Kong. It appears that securities regulators worldwide are becoming more open to including cryptocurrencies in traditional investment vehicles.
It is important to note that while spot BTC ETFs focus solely on cryptocurrencies, 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 cryptocurrencies. Instead, there will be multiple UCITS funds with a percentage allocation in cryptocurrencies.
Currently, EU regulations prohibit independent investment products centered around cryptocurrencies. Therefore, investors can only access them through exchange-traded notes.
The EU is recognized for its strict regulatory approach to cryptocurrencies. 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 key questions posed by the ESMA in the feedback is how the inclusion of specific cryptocurrencies in the framework would be impacted by MiCA.
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