London-based asset manager Jupiter Asset Management has canceled its investment in an XRP exchange-traded product (ETP). As per the FT report, the reason for such cancelation is due to compliance issues coming from divergent regulations within the European Union.
Further, the report stated that the €565 million Gold & Silver fund initially purchased $2.57 million worth of the 21Shares’ Ripple XRP ETP in the first half of 2023. However, during the company’s internal oversight process the trade investment was flagged. As Irish regulations currently prohibit crypto exposure in Ucits funds, Jupiter’s compliance team was forced to withdraw the holdings, resulting in a loss of $834.
Per the official update, the Central Bank of Ireland has introduced new regulations governing the extent to which Irish investment funds can invest in digital assets. The guidelines state that the different regulations apply to various funds. QIAIF funds, for instance, may invest indirectly in digital assets up to 20% of their value without seeking approval. UCITS and RIAIF funds are not permitted to invest in digital assets.
This current incident related to Jupiter Asset Management highlights the patchwork regulatory landscape surrounding crypto assets in Europe. While Ucits funds allow up to 10% investment in illiquid assets, interpretation varies across member states. Ireland and France, for example, currently oppose crypto exposure in these funds, while Germany permits it through ETPs that directly reflect the underlying asset.
This inconsistency poses challenges for fund managers seeking consistent crypto exposure across the EU. DWS’s Fintech fund in Germany for example holds an Ethereum ETN, demonstrating the differing approaches.
The European Commission has recognized this issue and initiated a review of the Ucits eligible assets directive. This review aims to assess potential modifications that could allow funds to invest in a wider range of assets, including crypto.
According to Patrick Hansen, a notable figure in the blockchain industry, Europe had long been a hub for Bitcoin Exchange Traded Products (ETPs). These included Exchange Traded Commodities (ETCs) and exchange-traded notes (ETNs), which had been prevalent in the European market for many years. However, these European instruments differed notably from the U.S. Bitcoin ETFs in cost and security aspects.
While Jupiter’s investment was short-lived, it underscores the ongoing regulatory debate surrounding crypto assets in Europe and the need for harmonization to facilitate wider adoption by traditional financial institutions.
