4,000 German Funds Greenlighted to Start Investing In Crypto (UPDATED)
German legislation that enters into force on August 2 allows around 4,000 of the country’s so-called special funds to invest in cryptoassets, possibly paving the way for a spike in German investors’ exposure to crypto. (Updated on July 2, 07:48 UTC with a comment from Deutsche Börse Group.)
Under the new rules, Germany’s Spezialfonds will be allowed to invest up to 20% of their portfolios in cryptoassets.
In May, Dominik Tyrybon, Associate at Austrian law firm Schoenherr Attorneys at Law, predicted that the legislation will “undoubtedly boost Germany's position as a financial investment hub” and represents “an important next step towards legitimizing cryptoassets as an asset class” in the German economy.
“Market experts already expect that the new regulation will unleash significant investments into the crypto markets,” Tyrybon said.
The lawyer quoted estimates by Sven Hildebrandt, CEO of German firm Distributed Ledger Consulting (DLC), who sees a potential inflow of EUR 350bn (USD 415bn) to crypto assets.
“That would be around one-fifth of the assets of around EUR 1.87trn currently tied up in approximately 4,000 open-end domestic special funds. The question remains: who is next?” Tyrybon wrote.
Meanwhile, Frank Dornseifer, Managing Director of Germany’s Federal Association of Alternative Investments (BAI), was quoted by local news site T3N.de as saying that the new rules should apply not only to special funds, but to a broader group of financial institutions that should also include public funds, as they unnecessarily keep a part of private capital away.
“Generally, there is a lot of interest in the crypto trading sector, not only by institutional investors but also by retail investors,” a spokesperson for Deutsche Börse Group, told Cryptonews.com.
As reported, the Group has acquired a majority stake in Switzerland-based Crypto Finance AG, a provider of trading, storage, and investment in digital assets services to institutional and professional clients.
“In Germany, a number of legal changes have recently come into force, which among other things make it possible to issue digital/crypto securities in Germany and allow domestic special [alternative investment funds] to add crypto assets, i.e. in particular cryptocurrencies, to their investments,” the spokesperson said, adding that it "brings more legal certainty for all parties involved, not only in terms of regulation, but also in terms of civil law."
The Fondsstandortgesetz legislation was drafted by the Ministry of Finance and the Ministry for Economic Affairs and Energy which are run by Olaf Scholz from the Social Democratic Party of Germany (SPD) and Peter Altmaier from the Christian Democrats Union (CDU), respectively.
The law’s implementation follows an earlier decision by Germany to enable banks to sell and store cryptoassets starting on January 1, 2020. The move spurred a number of partnerships between German banks and crypto custody providers.
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(Updated on July 30, 16:25 UTC: the legislation enters into force on August 2, not July 1 as reported earlier.)