EU invites stakeholders to share their views on the inclusion of cryptocurrency in the 12 trillion euro investment market.

The European Securities and Markets Authority (ESMA), the security watchdog of the European Union, is considering the inclusion of cryptocurrency in the 12 trillion euro ($12.8 trillion) investment product market. To gather expert opinions, ESMA has asked industry experts whether Undertakings for Collective Investment in Transferable Securities (UCITS), a market valued at 12 trillion euros, can incorporate various asset classes like structured/leveraged loans, catastrophe bonds, emission allowances, commodities, crypto assets, and unlisted equities. UCITS refers to investment funds that aim to simplify and protect investment transactions, including mutual, exchange-traded, and money market funds, which are regulated by the EU but can also be accessed by non-EU investors. Stakeholders of UCITS have until August 7th to submit their comments, and if approved, UCITS would become one of the largest mainstream funds with exposure to crypto assets. This move by the EU watchdog comes as Bitcoin exchange-traded funds (ETFs) gain approval in the US and Hong Kong, indicating a growing acceptance of crypto exposure in traditional investment vehicles worldwide. While BTC ETFs focus solely on cryptocurrency, UCITS investments are divided into various fund types, each with a specific asset allocation based on its risk profile. Therefore, even if approved, there will not be an independent UCITS fund with a 100% crypto allocation, but rather multiple UCITS funds with a certain percentage of crypto allocation. Currently, EU regulations prohibit independent investment products centered around cryptocurrency, so investors must access them through ETNs. Europe is well-known for its stringent crypto regulatory policies and was among the first regions to introduce a comprehensive regulatory framework for crypto assets through the Markets in Crypto Assets (MiCA) initiative. In the feedback process, ESMA also seeks to understand how the addition of specific cryptocurrencies to the framework would be affected by MiCA.