The European Securities and Markets Authority (ESMA) is seeking opinions from various stakeholders, including industry professionals and experts, to determine whether the scope of Undertakings for the Collective Investment in Transferable Securities (UCITS) qualified assets should be expanded to include other asset classes such as cryptocurrencies, catastrophe bonds, and carbon emission allowances. Given the market size of UCITS at 12 trillion euros, this move could potentially allow cryptocurrencies to enter a larger market than the US Bitcoin ETF.
UCITS aims to provide a secure and efficient collective investment product market within Europe, allowing various fund products to freely circulate among EU member states without the need for individual registration in each country.
UCITS funds adhere to a set of strict management and investment restrictions, including requirements for liquidity, leverage, investment diversification, and risk management. These rules ensure high transparency and security of the funds, with the aim of protecting the interests of investors. Therefore, UCITS funds are generally seen as suitable investment tools for a wide range of retail investors. They can invest in stocks, bonds, money market instruments, and other permitted assets.
Financial regulatory expert Sean Tuffy stated in an interview with DL News that this could be a disruptive potential positive development.
On the other hand, Andrea Pantaleo, a lawyer specializing in cryptocurrency regulations and litigation, expressed that the inclusion of cryptocurrencies in UCITS would have a more significant impact than the US ETF, as many funds may be willing to invest small amounts of liquid assets in crypto assets. Additionally, the US Bitcoin spot ETF is based on a single asset, requiring authorization from regulatory authorities for fund investments. In contrast, UCITS investments are composed of various fund categories, eliminating the need for authorization for each investment in crypto assets, which would also benefit market liquidity.
