Regulatory changes in Germany may open a flood of institutional crypto investments if other jurisdictions follow suit
Regulatory changes in Germany to allow institutional investors to hold 20% of their assets in cryptocurrencies, is just the first step in what an industry body believes will lead to a flood of mass adoption of crypto as an asset class.
Global Digital Finance (GDF), an industry body with more than 100 global financial organisations as members, expects other regulators to follow the German example, pointing out that the Bank for International Settlements is already providing confidence for financial institutions to invest in crypto and has set out a potential framework.
Under the new German regulations which came into effect on 02 August, so-called special funds (Spezialfonds in German) can hold up to 20% of their assets in cryptocurrencies paving the way for increased investment by pension funds and insurers in Germany.
Analysts are predicting the move could mean up to US$400 billion of crypto investment by special funds which currently hold more than US$2.1 trillion of assets.
Lavan Thasarathakumar, Director of Regulatory Affairs EMEA at Global Digital Finance said: “This opens the gates for mass adoption. Increased institutional investment into cryptoassets will pave the way for new products and services to be produced and for more innovative solutions that can take the crypto industry on to a new plain and deliver on some of the benefits that it has promised.
“The key component of the law is that it sets clear guidelines under which financial institutions will be expected to invest in cryptoassets. This gives confidence and a mandate for institutions to be able to invest money in crypto.”
GDF expects others to follow the ‘very proactive approach’ of German regulators and also highlights the decision by the Securities and Exchange Commission in the US to allow special purpose broker dealers to invest in cryptoassets as a great starting point.
Cryptoassets like Bitcoin are in great demand by both retail and institutional investors due to its uncorrelated 10-year performance which is unrivalled by any other asset class.
