A cryptocurrency investment firm urges the European Securities and Markets Authority (ESMA) to implement standardized regulations for integrating crypto assets into UCITS (Undertakings for Collective Investment in Transferable Securities) funds. This request was made public on October 7.
Current Regulatory Inconsistencies
The firm highlights that the current regulatory framework is inconsistent. As a result, this creates confusion among retail and institutional investors across Europe. For instance, countries like Germany and Malta permit UCITS funds to invest in crypto. However, other nations, including Luxembourg and Ireland, prohibit such investments.
Impact on Retail Investors
Mandy Chiu, the Head of Financial Product Development, emphasizes that this fragmented landscape restricts retail investors from fully benefiting from cryptocurrency. She states:
“By providing a consistent set of rules across Europe, ESMA could open up new avenues for investors to diversify and enhance their portfolios in a regulated environment that is designed for investor protection.”
Moreover, Chiu notes that clear regulations would stabilize the market and promote growth in the crypto sector.
Recommendations for Comprehensive Guidelines
In response, the firm calls on ESMA to develop comprehensive guidelines. These guidelines should facilitate indirect exposure to cryptocurrencies across all EU member states. According to 21Shares, such regulations would enhance investor protection and broaden access to crypto investments.
Regulatory Clarity Amid MiCA Implementation
This push for regulatory clarity coincides with ESMA’s review of feedback from its recent consultation. The consultation focuses on including new asset classes, including cryptocurrencies, in UCITS funds.
Notably, this request from 21Shares aligns with the EU’s gradual implementation of its Markets in Crypto Assets (MiCA) regulation. MiCA establishes a comprehensive legal framework for crypto, making the EU the first major region to adopt such regulations. It creates a uniform rulebook for digital assets, balancing user protection with the encouragement of innovation.
Requirements Under MiCA
Under MiCA, crypto service providers must obtain authorization from one of the EU’s national financial regulators. This requirement allows them to operate within the region. Consequently, the regulation has already impacted the stablecoin sector. For instance, firms like Coinbase have announced plans to delist stablecoins that do not comply with EU standards by the end of 2024. Additionally, crypto exchanges have begun aligning their policies with MiCA guidelines, while funds still lack necessary clarity.
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