The European Union’s security watchdog, the ESMA, is actively exploring the possibility of integrating cryptocurrencies into the vast €12 trillion investment product market. In an effort to gather insights, the ESMA has reached out to industry experts to seek their opinions on whether Undertakings for Collective Investment in Transferable Securities (UCITS) can incorporate various asset classes, including crypto assets, commodities, structured loans, emission allowances, catastrophe bonds, and unlisted equities.
UCITS are investment funds designed to streamline and safeguard investment transactions, encompassing mutual funds, exchange-traded funds, and money market funds. While these funds are governed by EU regulations, non-EU investors can also participate in them. Unlike solely crypto-focused spot BTC ETFs, UCITS investments encompass a variety of fund types, each with its own asset allocation based on risk profiles. If approved, it is unlikely that there will be independent UCITS funds with a 100% allocation to cryptocurrencies. Instead, multiple UCITS funds would likely feature a percentage allocation to crypto assets.
This move by ESMA coincides with the recent approvals of spot Bitcoin exchange-traded funds (ETFs) in the United States and Hong Kong. It appears that regulators worldwide are gradually becoming more receptive to incorporating crypto exposure into traditional investment avenues.
Stakeholders involved in UCITS have been given until August 7 to submit their feedback. If approved, the inclusion of crypto assets within UCITS would mark a significant milestone, potentially establishing them as one of the largest mainstream investment vehicles with exposure to cryptocurrencies.