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Cryptocurrencies require a ‘harmonised approach’: European Commission
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Europe needs to change its cryptocurrency rules to ensure a harmonized approach across the continent, according to Helene Bussieres, deputy head of asset management at the European Commission.
Speaking at ETF Stream’s ETF Ecosystem Unwrapped 2024 last week, Bussieres said “harmonization and convergence” are essential to prevent national regulators from taking divergent approaches to the asset class.
Earlier this month, the European Securities and Markets Authority (ESMA) launched a review of the UCITS Eligible Assets Directive, potentially opening the door to allowing direct exposure to cryptocurrencies in UCITS.
“We are working to change the cryptocurrency rules to introduce a more harmonized approach across the EU,” he said.
“We know that some national competent authorities (NCAs) take a relatively liberal approach compared to others which are much more rigid, so what matters to us is harmonization and convergence.”
German regulator BaFin allows UCITS funds to buy crypto exchange-traded notes (ETNs) with delta one exemption, a derivative that tracks the performance of the underlying asset.
Meanwhile, the Spanish regulator, the Comisión Nacional del Mercado de Valores (CNMV), also allows UCITS to have exposure to financial instruments with performance linked to cryptocurrencies, provided they do not embed derivatives.
The Central Bank of Ireland (CBI) also has a cautious approach towards cryptocurrencies and does not allow indirect exposure to the asset class.
ESMA’s review of the Eligible Assets Directive will also assess structured and leveraged loans, AT1 bonds, commodities, delta-one instruments and ETNs.
Bussieres added that UCITS feedback from the industry has been positive so far and that he does not want to “rock the boat” with too many changes.
“We are aware of divergent national practices regarding resource eligibility and believe it is extremely important to promote greater convergence,” he said.
“Value for money” rules?
The European Commission also provided an update on the EU’s Retail Investment Strategy (RIS) which has faced challenges in recent months.
The European Parliament voted to remove the ban on incentives from the RIS, which had already been significantly relaxed to only recommend the free sale of funds.
The move raised conflict-of-interest concerns, pushing investors into higher-fee products and out of ETFs.
“The role played by retail investors in ETFs is extremely important and that is why, when the Commission adopted the RIS, it sought to address conflicts of interest in the investment journey,” Bussieres said.
The story continues
“ETFs would particularly benefit from conflicts of interest. We want to avoid a situation where retail investors are recommended products that do not offer good value for money.”
He added that it is now up to the European Parliament and the Council to negotiate the final outcome, but warned that “if we cannot address all the problems through the RIS, we may have to look to use different tools in the future.”
“It will probably be slightly shorter terms compared to what we proposed in our initial texts… but I am sure that the topic will return to the agenda,” she said.
This article first appeared in etf.com’s sister publication, ETFStream.com.
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