For the first time, Germany intends to enable some institutional funds to invest billions of euros in crypto assets.
A new law in Germany has been passed, enabling over 4,000 institutional investment firms to invest billions in cryptocurrency assets. Legislation that goes into effect on Monday would allow so-called Spezialfonds (special funds) with pre-determined investing criteria to access digital assets.
Companies would be allowed to invest up to 20% of their portfolios in Bitcoin and other cryptocurrencies. Like pension funds and insurers, only institutional investors have access to the funds, which now handle around 1.8 trillion euros ($2.1 trillion).
Crypto assets, whose values have fluctuated and whose markets are controlled by a tiny number of investors, have been met with skepticism by lawmakers across the globe. The move signals a change in the asset class’s popularity after investments by some of the industry’s greatest names, including Mike Novogratz and Alan Howard.
Financial institutions’ prospects
Most funds will initially remain far below the 20% threshold, according to Tim Kreutzmann, a specialist on crypto-assets at BVI, Germany’s fund industry organization. Institutional investors, such as insurers, have stringent regulatory restrictions for their investment plans, he said. They must, on the other hand, desire to invest in cryptocurrency.
According to Kamil Kaczmarski, a financial services advisor at Oliver Wyman LLC, a management consulting company, the assets’ volatility may not be appealing to such investors in Germany, who are typically conservative. He anticipates funds to experiment with cryptocurrencies at a modest level, with the majority of them taking at least five years to come close to the barrier.
According to a spokesperson for Deutsche Bank AG’s asset management DWS group, the company is keeping an eye on developments. However, it has no plans to provide any crypto funds at this time. According to a spokesperson for DekaBank, one of the country’s largest asset managers, the bank has been contemplating investing in digital currencies but has yet to make a decision.