German institutional funds can now invest 20% of portfolios in crypto

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According to a new law coming into effect next week, some German investment funds will be able to hold up to 20% of digital assets. This is occurring against a backdrop of increasing demand from various institutions on the industry.

Germany’s next crypto movement

According to a July 30 Bloomberg report, Spezialfonds – German investment funds with fixed rules – will be able to allocate up to 20% of their holdings to digital assets. These funds are said to manage around 1.8 trillion euros or $ 2.1 trillion and are only accessible to local institutional investors like insurers or pension companies.

Tim Kreutzmann – a cryptocurrency expert at BVI, the German fund industry body – pointed out that the majority of funds would probably prefer to start small at the start:

“Most funds will initially remain 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.

Even though the move comes after increased demand from many German institutions for cryptocurrency products, Kamil Kaczmarski – an executive at management consulting firm Oliver Wyman LLC – felt that many local investors are still skeptical, mainly in because of the famous volatility. He argued that this trend would continue for the next five years.

Deutsche Bank AG’s asset manager, DWS Group, and one of Germany’s leading financial institutions – DekaBank – have both expressed interest in investing in cryptocurrencies, a spokesperson said, but did not until now made no decision.

Deutsche Bank loves cryptocurrencies

As CryptoPotato reported in May, the German multinational financial institution – Deutsche Bank – has demonstrated its support for virtual currencies. At the time, its CIO – Christian Nolting – highlighted the growth of the asset class experienced in recent years and in particular following the COVID-19 pandemic. Additionally, he believes cryptocurrencies are here for the long haul:

“I think right now it’s clear that cryptocurrencies (in one form or another) are here to stay, but I would say they are far from a traditional asset class. “

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

“A widespread introduction of CBDCs accompanied by stricter cryptocurrency regulations could create a more difficult environment for crypto assets, as some of their advantages over traditional financial assets would wear off in the longer term.”

The Deutsche Bank executive also compared Bitcoin to gold, saying the main cryptocurrency has all the qualities of the precious metal. He went further, stating that one day BTC “could ultimately replace gold as a store of value.”

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