There could be a flood of institutional investments coming from Germany starting next week. On Monday, August 2, a law is coming into effect that allows Germanys institutional investors – under the Spezialfonds category – to invest in Bitcoin (BTC) and other cryptocurrencies.
Institutional players like pension funds and insurers can access these funds. Together, these institutional players in Germany manage a staggering 1.8 trillion euros ($2.1 trillion). The regulatory landscape for cryptocurrencies is evolving fast and more institutional players are joining the bandwagon.
However, with the explosion in the crypto market this year, lawmakers have been still taking a slow stand in formulating new rules for cryptocurrencies. Speaking of this development, Tim Kreutzmann, an expert on crypto-assets at BVI, Germanys fund industry body told Bloomberg:
“Most funds will initially stay well below the 20% mark. On the one hand, institutional investors such as insurers have strict regulatory requirements for their investment strategies. And on the other hand, they must also want to invest in crypto.”
All Depends on Crypto Market Volatility
Well, it is certain that digital currencies have given outsized returns over the last decade, the extreme market volatility has prevented institutional players from joining. Such players usually have a conservative approach to investing in assets with steady returns.
Kamil Kaczmarski, a financial services adviser at a management consulting firm Oliver Wyman LLC, said that the initial participation in the crypto funds could be at a low level. He noted that most funds wont leverage. the 20% threshold for at least the next five years.
DWS Group, the asset manager for Deutsche Bank AG, has been continuously monitoring the development. But a spokesperson confirmed that they are not currently planning to offers fund that has exposure to crypto. Germanys another popular asset manager DekaBank has been willing to enter the crypto market and an announcement could be soon made in this regard.