German regulators have given institutional funds the permission allocate part of their portfolios toward crypto investments, according to new policies. This is another step forward in the already crypto-friendly DACH region.
Up to one-fifth of funds targeted at institutional investors can now be allocated toward cryptocurrencies. German regulators still advise caution to asset managers when dealing with crypto and such volatile digital assets.
The new rules came into effect at the beginning of the month. They align with Germany’s Federal Financial Supervisory Authority’s (BaFin) attempt to neutralize its stance on crypto investments. In the past, the financial watchdog stressed its concern over the risky and volatile nature of the crypto market. This new development intends to show that the regulator nonetheless wants to encourage the future growth of emerging financial technology.
Allocation for institutional investors
In Germany, assets held in the specialized funds called Spezialfonds, are the ones to which the new regulations apply. These funds are exclusive to institutional investors and not the general population. According to Germany’s trade association BVI, the assets under management of these funds hovered around two trillion euros during the first quarter of the year.
"Companies are responsible for the pension promises that they make to their members so they are very conservative investors. I would expect that company pension schemes will proceed very cautiously when assessing cryptocurrencies." - Klaus Stiefermann, managing director at ABA
Now that these funds have the potential to be converted into crypto assets, this could potentially shift billions of euros into the crypto market. Nonetheless, regulators, officials, and representatives still have hesitations towards the ever-shifting crypto space.
Germany continues crypto friendly trends
The new policies on fund allocations follow another big announcement made by Coinbase at the end of last month. The cryptocurrency exchange behemoth finally gained approval to offer crypto custodial services in Germany. This marked Coinbase as the first cryptocurrency exchange BaFin allowed a crypto custody license.
Germany also came out with a series of moves, friendly to the future of blockchain development within the country. A select group of high school graduates will have their graduation diplomas issued using blockchain technology.
Additionally, last month German lawmakers allowed companies to launch blockchain-backed debt securities. While the country’s lawmakers may still be skeptical, these cryptocurrency and blockchain forward moves are steps to keep Germany a global leader in innovation.
