By Alicia Maher
A new German legislation has been passed, instigating speculations that a $415 crypto investment could be made by investment funds in the European country. The new law is an indication that Germany is slowly turning its back on its previous position which disallowed the funds to invest in crypto assets. Following the law, investment funds are now empowered to apportion 20% of their total assets to cryptocurrencies.
Germany joins other countries taking active positions on crypto assets despite dominant disposition on cryptocurrencies, smacking of scepticism and apprehension. However, they have been gaining traction in the mainstream financial sector, with a handful of traditional financial institutions making foray into the space. Institutional investors are juggling to find their bearings in the space as they have been making substantial investments on this asset class.
$415 Billion Crypto Investments Looming
The legislation which came into operation today was introduced earlier in April and endorsed by the German Parliament. Studies put the total value of assets held by German SpezialFond (Special Investment funds) at $2 trillion. However, out of this figure, $415 billion could be expended on crypto assets as the law provides. The Fund Location Act has paved the way for a potential surge in the crypto market.
Interestingly, Germany recently licensed one of the leading crypto exchanges, Coinbase, to begin operations in the country, making it the first crypto exchange to get approval. Although this move came before the new law, it represents a new and favorable stance of Germany on cryptocurrencies, and portends future pro-crypto regulations in the European country. By virtue of the new legislation, Coinbase will be able to offer crypto services to German investors. Experts have also posited that the crypto exchanges will set the pace for other crypto exchanges who will be looking to begin operations in the coming months.
German to Lure Other European Countries
On the other hand, the Special funds may not be willing to invest on crypto assets, the profitable returns on crypto investments could stand as a counter-argument, thereby luring them into the space. SpezialFonds are the most preferred investment channels in Germany. By extension, the new law would apply to newly established financial institutions, insurance companies and pension funds. With the pivotal role Germany plays in the Eurozone, more european countries may enact favorable crypto regulations as well.
Meanwhile, the UK has outlawed the operations of crypto exchanges, making Binance, another leading crypto exchange, to close operations in the country in a recent development. Binance also closed shop in the Ontario region of Canada. Financial regulatory bodies in most countries have upped the ante to crypto regulations, leading to heavy crackdown on crypto firms who have refused to comply with existing guidelines. Notwithstanding, the crypto market is resilient enough to withstand these travails.