Germany is changing the rules of the game for institutional funds, the Spezialfonds. They can now hold up to 20% of their assets in cryptocurrencies. Since June, institutional demand for Bitcoin has come to a serious halt. However, these investors are not deserting the crypto market in Europe, opting in particular for multi-asset products.
Moreover, according to a recent CoinShares survey, institutional investors are planning to gain more exposure to crypto-assets in the coming years. And Germany intends to facilitate these investments for them.
Institutional investors keen to invest in crypto
On 2 August, a new law came into force in Germany governing the governance of Spezialfonds, funds reserved exclusively for institutional investors. From now on, they can hold up to 20% of their assets in cryptocurrencies.
This legislative development opens the way for new capital and the development of pension funds in the crypto market. As Bloomberg reports, the special funds are only available to institutional investors, including pension funds and insurers.
In value terms, this new 20% threshold equates to over $400 billion potentially investable in crypto assets. Spezialfonds currently manage nearly €1,800 billion in assets.
However, one should not expect a sudden rush of institutional investors into crypto. Despite this regulatory change in Germany, barriers remain for these investors, especially insurers.
Germany, a benchmark for crypto ETPs
This is pointed out by an executive of the German Investment Fund Association (BVI), Tim Kreutzmann. According to him, it is likely that most of the funds affected by the measure will keep a ratio well below 20%, initially.
“On the one hand, institutional investors such as insurers have strict regulatory requirements for their investment strategies. And on the other hand, they must also want to invest in crypto,”
he justifies to Bloomberg.
While France wants to be a crypto and blockchain nation, it seems to be outpaced by its neighbor from Europe. The complexity for Europe is to find a balance between prudence towards digital assets and encouraging innovation.
In this respect, the German blockchain strategy, formulated in 2019, provides 44 measures to simplify its adoption. These are expected to be implemented by the end of the year. Among these measures is easier access to digital investments. Germany is already a leading market for crypto-currency exchange-traded products, ETPs.
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