A new law came into effect in Germany. According to it, local institutional funds can invest up to $ 415 billion in crypto assets, or up to a fifth of their portfolios.
The law, which came into force on Monday, allows special funds with fixed investment rules to invest up to 20% of their assets in Bitcoin and other crypto assets. Only certain institutional investors have access to such funds. These include insurance and pension companies. At the moment, they manage assets worth about 1.8 trillion euros (about 2.1 trillion dollars). The new law should make Germany more attractive for investments on a global scale.
Previously, investments in digital assets were completely prohibited for such institutions. However, funds will now be able to diversify their investment portfolios by investing in digital assets. Thus, up to $ 420 billion can enter the crypto market.
Large investments in crypto can have a big impact on the whole of Europe; as Germany’s economy is the largest in the eurozone. Such a decision will increase the chances of Bitcoin becoming one of the main investment assets.
Reaction and forecasts of crypto analysts and experts on the new German investment law for funds
German investors, known for their conservative approach to finance and investment, are likely to be wary of high-volatility cryptocurrencies at first. Experts suggest that only a few funds will risk experimenting with crypto; most investors will wake up interest in such assets no earlier than in five years.
Tim Kreutzmann, an expert at the German crypto company BVI, believes that the total investment in the crypto market “at the initial stage” will remain completely below 20%; due to the fact that institutional investors such as insurers have strict regulatory requirements for their investment strategies. However, they must show interest in and investing in the crypto industry.
Financial services consultant at Oliver Wyman LLC, an international management consulting firm, Kamila Kaczmarski believes that asset volatility can be unattractive to investors in Germany who are traditionally very conservative. He expects funds to experiment with cryptocurrencies only at a low level.
The largest German companies are currently not showing significant interest in the cryptocurrency field. For example, Deutsche Bank AG, the largest financial conglomerate in Germany in terms of assets, is following the development of events, but currently does not plan to offer any funds for the purchase of cryptocurrency. DekaBank, one of the country’s largest asset managers, is considering investing in digital currencies but has yet to make a decision.
Germany became the first major jurisdiction to lift the restriction on the investment of funds in cryptocurrencies. However, it should be noted that we are talking specifically about special funds that are closed to retail investors. Therefore, the German Federal Association for Alternative Investment (BAI) hopes for similar changes for public funds.
Interestingly, the German division of the American cryptocurrency exchange Coinbase was recently licensed to provide crypto custody services. This is the first such license in the country.