New German rules on crypto assets to ‘open the gates’ for pension funds

New regulations on crypto assets in Germany will “open the gates” for pension funds to invest in the asset class, it has been suggested.

On 2 August, a German law came into effect that allows Spezialfonds, known as special funds, to hold up to 20 per cent of their assets in cryptocurrencies.

Global Digital Finance (GDF) director of regulatory affairs EMEA, Lavan Thasarathakumar believes this will pave the way for increased investment by pension funds and insurers in Germany.

GDF is an industry membership body that promotes the adoption of best practices for crypto assets and digital finance technologies. It expects other regulators to follow suit and believes a consultation paper from the Bank for International Settlements is already providing confidence for financial institutions to invest in crypto and has set out a potential framework.

Analysts are predicting the move could mean up to USD 400bn of crypto investment by Spezialfonds which currently hold more than USD 2.1trn of assets.

Thasarathakumar said: “This opens the gates for mass adoption. Increased institutional investment into crypto assets will pave the way for new products and services to be produced and for more innovative solutions that can take the crypto industry onto a new plane and deliver on some of the benefits that it has promised.

“The key component of the law is that it sets clear guidelines under which financial institutions will be expected to invest in crypto assets. This gives confidence and a mandate for institutions to be able to invest money into crypto.”

GDF expects others to follow the approach of German regulators and also highlights the decision by the Securities and Exchange Commission in the US to allow special purpose broker-dealers to invest in crypto assets as a great starting point.

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