EU Regulator Contemplates Approval of Bitcoin for UCITS Products.

The European Securities and Markets Authority (ESMA), the financial overseer of the EU, is currently in the process of evaluating the inclusion of Bitcoin in the region's extensive €12 trillion mutual fund market.

ESMA is actively seeking input on the expansion of eligible assets for Undertakings for Collective Investment in Transferable Securities (UCITS), which represent the lion's share of investment vehicles held by EU citizens, totaling over 75%.

If Bitcoin secures approval for UCITS, it would mark a significant milestone, granting mainstream access to Europe's mutual fund landscape. This means that fund managers would have the opportunity to incorporate Bitcoin into their portfolios within the established UCITS framework.

ESMA's consultation period, open until August 7, precedes any formal recommendations. This move comes on the heels of recent approvals for Bitcoin Exchange-Traded Funds (ETFs) in the US and Hong Kong, indicative of a global trend toward more favorable regulatory stances on cryptocurrencies.

However, hurdles persist, particularly concerning the custody of Bitcoin under existing EU regulations. Initiatives like the forthcoming Markets in Crypto-Assets (MiCA) legislation may necessitate alignment in terms of asset segregation protocols.

Nonetheless, ESMA's proactive stance underscores the increasing significance of Bitcoin within the European financial landscape.

Andrea Pantaleo, a legal expert, suggests that the impact of this decision could surpass that of recent Bitcoin ETF launches. Unlike these ETFs, which are solely focused on Bitcoin, inclusion in UCITS would involve diverse fund types with varying asset compositions.

While approval wouldn't automatically result in the creation of standalone Bitcoin funds within UCITS, it would open up trillions of euros in assets to modest exposure to Bitcoin. This could greatly enhance liquidity and foster wider adoption of Bitcoin within the EU. However, achieving inclusion will likely require navigating stringent EU regulatory standards.

In summary, ESMA's consideration of Bitcoin for UCITS represents a significant step toward mainstream acceptance within the European investment landscape.

source: https://www.nasdaq.com/articles/eu-regulator-considers-approving-bitcoin-for-ucits-products