Crypto-assets (like BTC) in EuVECA or ELTIF portfolios❓

Crypto-assets (like BTC) in EuVECA or ELTIF portfolios❓

When the harmonised alternative investment funds legislation was approved and adopted, crypto-assets were still considered a marginal type of investment. Thus, neither the ELTIF, EuVECA, EuSEF nor MMF regulations list crypto-assets as eligible investments. Further, they are not even excluded in the recitals of these regulations.

To assess whether EU harmonised AIFs may invest in crypto-assets, it is necessary to determine the category of crypto-assets. As EU financial law is based on technological neutrality, we should consider crypto-assets that qualify as financial instruments as eligible investments, identical to corresponding “traditional” financial instruments. The various EU laws on investment funds do not differentiate between the bonds or shares that are tokenized or non-tokenized.

In case of e-money tokens, category determination is rather straight forward, as these crypto-assets are deemed to be electronic money, and thus are funds as defined under PSD 2.

But what about the investments into ARTs or crypto-assets other than ARTs or EMTs❓

MMFs’ and ELTIFs’ investment policies are, by design, rather strict and do not provide enough room for direct investments into ARTs or crypto-assets other than ARTs or EMTs. On the other hand, EuVECAs and EuSEFs face no legislative restrictions for investments, outside of the obligatory part of their portfolio, composed of qualifying investments.

For more details on compatibility of EU harmonised AIFs’ investment policies with crypto-assets (focusing on crypto-assets other than ARTs or EMTs) please read the article prepared by me and Peter Varga: https://lnkd.in/dmJvR_By

💡 We will address more regulatory / tax issues regarding crypto-assets on Highgate Crypto.

#cryptoassets #investmentfunds #aif