21Shares has called on Europe’s financial watchdog to create a “unified regulatory framework” to include cryptocurrency assets under the UCITS framework.
Responding to the European Securities and Market Authority’s (ESMA) industry-wide review of the UCITS Eligible Assets Directive, the crypto exchange-traded product (ETP) issuer said the current rules are “inconsistent across Europe” and create “confusion” for investors.
Rules around including crypto assets in UCITS funds differ across Europe, with national regulator’s interpreting the rules differently.
For example, German regulator BaFin allows UCITS funds to buy crypto exchange traded-notes (ETNs), while the Spanish regulator – the Comisión Nacional del Mercado de Valores (CNMV) – also allows exposure provided they do not embed derivatives.
21Shares said ESMA should establish “clear, consistent guidelines” around indirect access to crypto that applies to all member states.
It added a lack of a common approach can lead to gaps in investor protection, with many turning to “more expensive and less professionally managed” exposures.
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.
“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.”
ESMA launched a consultation in May in a bid to clarify which financial instruments are UCITS eligible, covering leveraged loans, AT1 bonds, commodities, emission allowances and crypto.
However, the European Fund and Asset Management Association (EFAMA) said it did not expect a “wave of new asset classes for ETFs” following the review.
In its response, EFAMA said a change in the guidelines could encourage “greater convergence between member states”, but added the topic of is inclusion was “too broad and nuanced” to be addressed in a consultation.
It added any findings should “not damage the reputation” of the UCITS brand.
