The cryptocurrency market may soon be flooded with new money. From 1 July, German investment funds can invest up to a fifth of their funds in crypto active assets.
Germany and Cryptocurrency market
The legislation has launched so-called special funds (Spezialfonds) into the cryptocurrency market. Around 4,000 operate in Germany and, according to Dominic Tyrybon of the law firm Schönherr, manage assets of around EUR 1.87 trillion. It is the local equivalent of a fund of qualified investors.
“It’s a damn big event. Spezialfonds has virtually all the money for investment. So far, however, they have not been able to direct the euro to crypto active activities. If only one percent were allocated to them, the impact on the digital currency market would be enormous, “explained Sven Hildebrandt, head of Distributed Ledger Consulting, who lobbied for the amendment to the law for two years.
But Hildebrandt expects it will take some time for the money of large institutional investors to come to the market. In the adoption of bitcoin et al., the Deutsche Börse Group, for example, already sees a business opportunity. The day before yesterday, it announced the takeover of the Swiss company Crypto Finance, which specializes in managing active crypto assets of institutional investors.
However, according to some analysts, recent market developments have suggested that cryptocurrencies may not gain confidence and interest from significant funds and companies efficiently. The reason is said to be the speed with which they descended from their price peaks.
Bitcoin has written off over 50 percent of its record in 35 days. In the case of ether, it took only eight days. The problem with such high fluctuations in value is that virtual currencies will look like an unusable investment from companies’ point of view.
However, Germany has indicated in its legislation that it wants to be one of the major players in the still-young industry. In Europe, Switzerland competes significantly with its approach with its Crypto Valley, similar to California’s Silicon Valley.
In the area around the city of Zug, several startups and technology companies (including Crypto Finance) are concentrated, and the local authorities also declare their support for bitcoin and the possibility of paying taxes using virtual coins.
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