New German institutional crypto investment rules will ‘open the gates’ to mass adoption

New German rules on institutional investment in crypto assets will ‘open the gates’ for mass adoption of the asset class, Global Digital Finance (GDF), the cryptoassets and digital finance industry membership body, believes.

GDF expects other regulators to follow suit and says a consultation paper from 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 law, which came into effect on 2 August Spezialfonds – also known as special funds – can hold up to 20 per cent 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 USD400 billion of crypto investment by Spezialfonds which currently hold more than USD2.1 trillion of assets. 

Lavan Thasarathakumar, Director of Regulatory Affairs EMEA at GDF, says: “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 into 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.

GDF, which with its members promotes the greater adoption of market standards for the use of crypto and digital assets, says crypto assets such as bitcoin are in great demand by both retail and professional investors due to the uncorrelated 10-year performance which is the best of any asset class.

Press date : 05.08.2021