EU seeks stakeholder opinion on adding crypto to 12T euro investment market

The European Union security watchdog, the European Securities and Markets Authority (ESMA), has sought the opinion of experts on whether to add crypto to the 12 trillion euro ($12.8 trillion) investment product market.

The ESMA asked industry experts for their views on whether Undertakings for Collective Investment in Transferable Securities (UCITS), an investment product market valued at 12 trillion, euros can gain exposure to different asset classes such as structured/leveraged loans, catastrophe bonds, emission allowances, commodities, crypto assets, and unlisted equities.

UCITS is a class of investment funds comprising products intended to protect and simplify investing transactions. UCITS are often comprised of mutual, exchange-traded, or money market funds. These funds are governed by EU regulations. However, non-EU investors can also gain exposure.

UCITS stakeholders have until Aug. 7 to submit their comments. If approved, UCITS would become one of the largest mainstream funds with crypto exposure.

The EU watchdog seeking opinion to add crypto assets as one of the asset classes for a security investment fund also comes amid the approval of Bitcoin (BTC) exchange-traded funds in the United States and Hong Kong as securities regulators worldwide are warming up to crypto exposure to traditional investment vehicles.

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While BTC ETFs are solely crypto-focused, UCITS investments are divided into numerous fund types, each with a particular asset allocation based on the fund’s risk profile.

This means that even if approved, there won’t be an independent UCITS fund with 100% crypto allocations but multiple UICTS funds with a certain percentage of crypto allocation.

EU regulations currently prohibit independent crypto-centered investment products. Thus, investors have to access them via ETNs.

Europe is known for its strict crypto regulatory policy. It is one of the first regions to introduce a complete crypto regulatory framework in the form of markets in crypto assets (MiCA).

One of the questions asked by ESMA in the feedback is how adding specific cryptocurrencies to the framework would or wouldn’t be affected by MiCA.

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