21Shares AG, an issuer of crypto exchange-traded products (ETPs), is urging the European Securities and Markets Authority (ESMA) to create a unified regulatory framework for including crypto assets in UCITS (Undertakings for Collective Investment in Transferable Securities) funds.
This move , the company says, would provide much-needed clarity for retail and institutional investors across Europe.
As it stands, the rules around including crypto assets in UCITS funds are inconsistent across Europe. There are UCITS holding crypto in countries like Germany and Malta, while in others countries, like Luxembourg and Ireland, this is not the case. These discrepancies create confusion, making it difficult for investors to understand and compare their options. The lack of a common approach can lead to gaps in investor protection, as investors have to access the asset through other means, often more expensive and less professionally managed.
21Shares believes that ESMA should establish clear, consistent guidelines around indirect exposure to crypto assets that apply across all EU member states. This would ensure a high level of protection for investors. Direct investment in cryptocurrency is nuanced for institutional investors and UCITS funds, while crypto ETPs, traded like securities, offer a seamless option without the need for additional setup.
A unified framework would align Europe with other major markets, such as the US and Hong Kong, which have already approved Bitcoin and Ethereum exchange-traded funds (ETFs).
Mandy Chiu, Head of Financial Product Development at 21Shares said,
“The current patchwork of regulations is creating confusion and preventing retail investors from accessing the full potential of crypto assets. By providing a consistent set of rules across Europe, ESMA could open up new avenues for investors to diversify and enhance their portfolios in a regulated environment that is designed for investor protection. At 21Shares, we focus on making crypto products easier, safer, and more conventional to trade—meeting the growing demand from investors who want to include these assets in their strategies.”
“With a unified regulatory stance, Europe can position itself at the forefront of financial innovation. Clear guidance from ESMA would not only promote market stability and investor protection but also encourage further growth and development in the crypto asset space. We believe it’s time to move forward and provide a framework that aligns with Europe’s tradition of supporting innovation and competitive markets.”
ESMA launched its Call for Evidence on the review of the UCITS Eligible Assets Directive on 7 May 2024. The consultation, which closed on 7 August 2024, sought input from industry stakeholders, including fund managers, institutional investors, and trade associations, on whether the current rules should be updated to include, among others, crypto assets and ETPs as eligible investments within UCITS funds.
ESMA is now considering the feedback received to develop a balanced and informed approach to potential regulatory changes.
