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Germany licenses investment companies in the digital currency market

Germany has passed a new law authorizing investment in digital assets for 4,000 special institutional investment funds in the country.

to the the report Germany has passed a new law allowing executives of the most popular institutional investment funds, known as Spezialfonds, to devote 20 percent of their investment to digital assets. This law will come into force on July 1.

The move has been hailed as strengthening Germany’s position as a financial investment hub, and experts believe that legalizing digital assets will lead to the overall growth of the industry.

Frank Schäffler, a member of the German parliament, said in an interview:

Adding digital assets to special funds is an important step in accepting them. In this regard, the law is moving in the right direction, and we openly welcome it.

The German Federal Parliament, the Bundestag, passed the law last Thursday, and it is expected to be approved by the Federal Council soon. This rule will apply to both existing special funds and new funds established by institutional investors such as financial institutions, insurance companies and pension funds.

There are a total of about 4,000 special investment funds in Germany that are now eligible to invest in bitcoin and other digital assets, said Sven Hildebrandt, managing director of the German-based Distributed General Consulting (DLC) consulting firm. “This is a very big issue,” he said.

About 1.2 trillion euros ($ 1.8 trillion) have been invested in these special funds, which have fixed investment conditions. At present, according to Hildebrant, none of these investments are in digital currencies because they are not legal.

Hildebrandt has been lobbying for more than two years to update laws in this area with the German asset management company BVI.

He said that from July 1, when the new regulations become law, if private funds in Germany (except for about a third of those designed solely for physical assets) decide to allocate even one percent of the budget to digital currencies, the impact will be felt. This industry will be huge.

He stated:

This will not happen overnight, we are talking about the largest investment tool in Germany and literally all the money in it.

He explained that theoretically, up to 350 billion euros ($ 422 billion) could enter the digital currency market only through special funds. For comparison, the total value of the Bitcoin market is currently $ 1 trillion.

Special Investment Funds (Spezialfonds) have no equivalent in the United States, but some have likened them to Special Investment Funds (SIFs) in Luxembourg and Eligible Investment Funds (QIFs) in Ireland.

This type of investment tool is attractive to institutions because it provides them with flexibility and less restrictions on liquidity requirements, diversification, borrowing restrictions, and leverage. At the same time, a robust regulatory framework provides investors with the reassurance they need.

Now, these funds are supposed to be the newest among the tools that institutions can use to invest in this field without actually buying digital currencies, and thus no longer deal with exchanges or digital asset wallets. To be.

Germany’s bold move in the field of digital currencies comes as Germany passed a law in early 2020 that allowed banks to sell and store digital currencies.

After German financial regulator BaFin recognized digital currencies as a financial instrument, ETC Group introduced the first Bitcoin-based exchange-traded product (ETC) based on Bitcoin (BTC). Launched in the German stock market.

Since then, bitcoin-based ETPs have proliferated in German stock markets. Iconic Funds, an digital asset management company, is launching its Bitcoin ETP this week.

State Street Bank, a leading investment fund, will manage the ETP; This is the first time this international bank has taken action. It will also be owned by Fidelity Digital Assets and Coinbase Custody.

The Frankfurt-based startup is a joint venture between Iconic Holding, a digital asset management group, and Cryptology Asset Group, run by renowned entrepreneurs Christian Angermayer and Mike Novogratz.

“The European market for digital currency ETPs has reached more than $ 5 billion in managed assets,” said Michael Geister, head of digital asset ETPs at Iconic.

There is a huge and growing demand from a variety of investors seeking access to digital assets.

Hildebrant believes that special funds with the possibility of investing in digital currencies can go even further. He said that the interest of institutions in these types of funds is growing sharply and Germany is a country that is very eager to comply with the regulations.

If this “crazy” interest is stabilized and all eligible funds invest 20 percent of their total budget in bitcoin, it will account for about a third of the current market value of all digital currencies, which, according to Hildbrant, “will never happen.” Gave “.

But he is much closer to his dream.


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