The European Securities and Markets Authority (ESMA) is soliciting opinions from industry participants and experts to determine whether transferable securities collective investment undertakings (UCITS) should be expanded to include other asset classes such as cryptocurrencies, catastrophe bonds, and carbon emission quotas. Considering the market size of UCITS is 12 trillion euros, this measure could potentially allow cryptocurrencies to enter a larger market than US Bitcoin ETFs.
UCITS aims to provide a safe and efficient market for collective investment products within Europe, allowing various fund products to freely circulate among EU member states without the need for individual registration in each country.
UCITS funds adhere to a set of strict management and investment restrictions, including requirements on liquidity, leverage, investment diversification, and risk management. These rules ensure high transparency and security of the funds, with the aim of protecting the interests of investors. Therefore, UCITS funds are generally considered as investment tools suitable for a wide range of retail investors. They can invest in stocks, bonds, money market instruments, and other permitted assets.
Financial regulatory expert Sean Tuffy stated in an interview with DL News that this is a potentially disruptive upside.
On the other hand, Andrea Pantaleo, a lawyer specializing in cryptocurrency regulations and litigation, stated that the impact of including cryptocurrencies in UCITS would be more significant than US ETFs, as many funds may be willing to invest small amounts of liquid funds in crypto assets. Additionally, US Bitcoin spot ETFs are based on a single asset, requiring regulatory authorization for fund investments. However, UCITS investments are composed of various categories of funds, so authorization is not required for each investment in crypto assets, which will also benefit market liquidity.
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