Institutional funds in Germany will be allowed to hold up to 20% of their holdings in cryptocurrency.
For the first time, Germany plans to allow certain institutional funds to invest billions of dollars in crypto assets.
A new law that takes effect on Monday will allow people to invest up to 20% of their assets in Bitcoin and other crypto assets through so-called Spezialfonds with fixed investment guidelines. The funds, which presently manage approximately 1.8 trillion euros ($2.1 trillion), are only accessible to institutional investors such as pension funds and insurers.
Crypto assets have been met with scepticism by lawmakers all over the world, whose prices have fluctuated and whose markets are dominated by a small number of investors. Following investments by some of the industry's biggest names, including Mike Novogratz and Alan Howard, the move signals a shift in the asset class's popularity.
Tim Kreutzmann, a crypto asset expert at BVI, Germany's fund industry association, said, "Most funds will initially stay well below the 20% mark." “On the one hand, institutional investors, such as insurers, are subject to stringent regulatory obligations when it comes to their investment plans. They must, on the other hand, wish to invest in crypto.”
The assets' volatility may not attract to such investors in Germany, who are known for their conservative, according to Kamil Kaczmarski, a financial services adviser at management consulting firm Oliver Wyman LLC. He anticipates funds will begin experimenting with crypto currencies at a low level, with the majority of them requiring at least five years to reach the threshold.
The asset manager DWS group of Deutsche Bank AG is monitoring developments but has no plans to provide any crypto funds at this time, according to a spokeswoman.
DekaBank, one of the largest asset managers in the country, has considered investing in digital currencies but has yet to make a decision, according to a spokeswoman.