The European Securities and Markets Authority (ESMA), the EU's financial watchdog, is evaluating the possibility of integrating Bitcoin and crypto into the region's €12 trillion mutual fund market.
ESMA is soliciting feedback on broadening the range of permissible assets for Undertakings for Collective Investment in Transferable Securities (UCITS). These products represent over 75% of the investment funds owned by EU citizens.
Approval of Bitcoin for UCITS could mark Bitcoin's mainstream debut in Europe, allowing fund managers to allocate a portion of their portfolios to the asset within this extensive framework.
ESMA will continue to collect opinions until August 7th, before issuing recommendations. This initiative aligns with the global trend towards regulatory acceptance, as seen with Bitcoin ETF approvals in the U.S. and Hong Kong.
However, challenges persist with Bitcoin custody under current EU regulations. Upcoming rules, such as the Markets in Crypto-Assets (MiCA) legislation, might necessitate coordinated efforts on asset segregation.
Despite these hurdles, ESMA's forward-looking stance acknowledges Bitcoin's increasing importance in Europe.
According to lawyer Andrea Pantaleo, the potential impact of Bitcoin's approval could surpass that of recent Bitcoin ETF launches. Unlike those singularly focused products, UCITS encompasses a variety of fund types with diverse asset allocations.
Thus, the approval would not necessarily lead to exclusive Bitcoin funds but would open up UCITS's trillions for moderate Bitcoin investments.