Starting next week, there could be a torrent of institutional investments from Germany. On Monday, August 2, a law will take effect that will allow German institutional investors to invest in Bitcoin (BTC) and other cryptocurrencies under the Spezialfonds category.
These funds are accessible to institutional actors such as pension funds and insurers. These German institutional players collectively handle 1.8 trillion euros ($2.1 trillion). The regulatory environment for cryptocurrencies is rapidly changing, and more institutional actors are jumping on board.
However, despite the crypto market’s meteoric rise this year, policymakers are still treading carefully when it comes to enacting new cryptocurrency regulations. Tim Kreutzmann, a crypto-assets expert at BVI, Germany’s fund industry group, informed Bloomberg about this development:
“At first, most funds will remain well below the 20% barrier. Institutional investors, such as insurers, are subject to stringent regulatory constraints for their investing plans. They must, on the other hand, wish to invest in crypto.”
Everything is dependent on the volatility of the cryptocurrency market.
While it is undeniable that digital currencies have provided outsized gains over the last decade, institutional investors have been hesitant to participate due to high market volatility. Such players normally take a cautious approach to investing in assets that provide consistent profits.
According to Kamil Kaczmarski, a financial services expert at management consulting company Oliver Wyman LLC, early involvement in crypto funds may be limited. He stated that most funds will not leverage beyond 20% for at least the next five years.
DWS Group, Deutsche Bank AG’s asset manager, has been keeping a close eye on the situation. However, a representative acknowledged that they had no plans to offer crypto-related funds at this time. DekaBank, another well-known asset management in Germany, has expressed interest in entering the crypto sector, and an announcement could be made shortly.