WEEKLY ANALYSIS ON CRYPTO CURRENCIES

Breaking: New German Law allowing institutions to invest in Crypto-currencies takes effect this week: Upto 300billion funds to be added to Crypto market in the coming months.

Last week has been greeted with a strong positive news for Crypto currency among German investors and institutional funds as some new laws governing German Spezialfonds comes into effect. According to this new German law, some German investment funds and other institutions will henceforth be able to hold up to 20% of their portfolios in digital assets as Crypto. This positive news for Crypto investment has been received with utmost joy amid growing demand from various institutions towards the Crypto industry.

With this new law, German investment funds with fixed rules – will be able to allocate as much as 20% of their holdings in digital assets. This means we can see upto $300 billion worth of investments flowing into Crypto currency in the coming months with the German law set out to back them and protect investors fund.

According to the report from Bloomberg, “this new law alters fixed investment rules governing Spezialfonds, also known as special funds, which are only accessible to institutional investors such as pension funds and insurers.” Spezialfonds currently manage about $2.1 trillion, or 1.8 trillion euros, worth of assets and hence, we can anticipate a great boom in the Crypto space.

Tim Kreutzmann – an expert on cryptocurrencies at BVI, Germanys fund industry body – pointed out that the majority of the funds would most likely prefer to start small at first. In his exact words words:

“Most funds will initially stay 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.”

However, this approval has been due to an increased demand from numerous German institutions towards the adoption of cryptocurrency products.

The decision is further informed by the age-long support which the banking institutions had offered to Crypto currencies consistently over the years. The most prominent has been Deutsche Bank which has historically demonstrated its support towards virtual currencies. Back then, its CIO – Christian Nolting – highlighted the growth of theasset class experienced in the past few years and especially following the COVID-19 pandemic. Moreover, he believes cryptocurrencies are here for the long haul. In his exact words:

“I think that by now, it is clear that cryptocurrencies are here to stay, but I would argue that they are far from a mainstream asset class.”

On the contrary, Nolting argued that CBDCs could harm digital assets and reduce their chances of serving as international payment instruments. In his exact words:

“A widespread introduction of CBDCs accompanied by higher regulation of cryptocurrencies could create a more challenging environment for crypto assets as some of their advantages compared to traditional financial assets would fade in the longer term.”

Nevertheless, the new rule, which was passed in early July, represents an important evolution in how German lawmakers govern digital assets. Germanys Federal Financial Supervisory Authority, better known as BaFin, continues to urge investing with caution when it comes to digital-asset investing. At the same time, the financial watchdog encourages blockchain innovation in the country.

Remarkably, Germany first embarked on a comprehensive blockchain strategy in 2019, promoting 44 adoption measures that are set to be realized by the end of 2021. The new approach to blockchain and crypto also introduced measures that would make it easier for investors to access digital investments.

Above all, the German nation has also become a leading market for cryptocurrency exchange-traded products (ETP). Providing great liquidity in the market by allowing more institutional funds to be added into the market.