- Europe’s securities regulator, the European Securities and Markets Authority (ESMA), is reviewing regulations that could potentially allow the inclusion of crypto assets in a market valued at approximately €12 trillion.
- The review is part of a broader assessment of the Undertakings for Collective Investment in Transferable Securities (UCITS) Eligible Assets Directive (EAD).
- This development could represent a significant shift in the investment landscape, potentially mainstreaming crypto assets in Europe.
ESMA is reviewing regulations that could potentially integrate cryptocurrencies into a vast investment market. This development could be a game-changer for crypto assets in Europe.
The Next Big Catalyst For Crypto?
The review by ESMA aims to address the evolving financial landscape, where the number and variety of financial instruments have expanded significantly since the UCITS framework was established nearly two decades ago. This expansion has led to uncertainties in determining asset eligibility, causing divergent interpretations and applications of the directive across member states. If ESMA is convinced, this could be a significant step in mainstreaming crypto assets in Europe.
Implications for Stakeholders
The Call for Evidence targets a broad audience, including investors, consumer groups, UCITS management companies, self-managed UCITS investment companies, depositaries, and trade associations. These stakeholders are invited to share their insights on market practices, interpretative issues, and practical application concerns related to the eligibility criteria and other provisions of the UCITS EAD.
Challenges and Opportunities
One of the key areas of focus is the transversal consistency of key notions and definitions used in the UCITS EAD with other pieces of legislation in the EU Single Rulebook. This alignment is crucial to ensure that any new asset classes, such as cryptocurrencies, are integrated smoothly and consistently across all regulatory frameworks. However, a significant obstacle is the coordination of custody regulations, which must align with the EU’s upcoming Markets in Crypto-Assets regulation (MiCA).
Conclusion
The potential inclusion of cryptocurrencies in UCITS comes at a time when other major economies, such as the US and Hong Kong, have begun integrating crypto assets into their financial products. The ESMA consultation process is set to conclude on August 7, 2024, after which the watchdog will compile the feedback and develop its technical advice to the European Commission. This advice will play a crucial role in determining whether cryptocurrencies will be included in the UCITS framework, potentially heralding a new era for crypto investment in Europe.
