EU body mulls including digital currency ETFs in UCITS for retail investors

Undertakings for Collective Investment in Transferable Securities (UCITS) funds are hugely popular in the European Union (EU) due to their strong investor protections and their ability to be transferred across the EU. They make up 75% of the total investments made by EU retail investors.

For the first time since 2007, the European Securities and Markets Authority (ESMA) is reviewing which assets might be appropriate to include in UCITS. Of course, given all that has changed since then, digital currencies like BTC and ETH are up for consideration.

UCITS require assets to be liquid, so the ESMA is considering allowing indirect exposure via exchange traded funds (ETFs), among other things. In addition to liquidity, risk diversification and the ability to calculate net asset values are being considered.

The ESMA is currently gathering evidence regarding eligible assets for UCITS. This call for evidence closes on August 7.

EU leading in digital assets, but it’s tightly regulated

The consideration for digital currencies to be included in UCITS is yet more evidence that the EU is embracing digital currencies like BTC. However, moon boys looking for the political block to pump their bags will be disappointed; everything the EU is doing related to digital assets is highly regulated and tightly controlled.

The recent MiCA regulations are just one example. MiCA rules provide a harmonized, EU-wide legal framework for the issuance, trading, and management of digital assets, including everything from BTC to stablecoins and utility tokens.

The EU’s MiCA rules prioritize transparency, authorization and supervision, operational requirements, and the prevention of market abuse. Other countries, from the U.K. to Japan, are following its lead in allowing investment in digital assets, but under tight control.

The era of utility is here

At CoinGeek, we’ve been predicting for years that blockchain technology and digital currencies would enter what we call the ‘era of utility.’ This is when, as with all new technologies, the initial bubble pops, and people begin to focus on use cases for it.

While BTC and (potentially) ETH ETFs provide no value other than speculation, the rest of the world is beginning to focus on use cases for blockchain. Smart investors are funding startups and focusing on solutions that use blockchain to fix real problems. Faster settlements, greater transparency in record-keeping, and revolutionary tools to fix broken supply chains and enhance cybersecurity are all in focus.