Crypto Requires ‘Harmonized Approach’: European Commission

ETF Investment Vehicles

Europe needs to change the rules on cryptocurrency to ensure a harmonized approach across the continent, according to Helene Bussieres, European Commission vice-president of asset management.

Speaking at ETF Stream’s ETF Ecosystem Unwrapped 2024 event last week, Bussieres said “harmonization and convergence” was essential to prevent national regulators from taking different 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 disclosure of cryptocurrencies in UCITS.

“We are trying to go as far as we are responsible in changing crypto rules to bring 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 that are much more strict, so for us it is about harmony and convergence.”

German regulator BaFin allows UCITS funds to purchase crypto exchange-traded notes (ETNs) with delta one exemption, a derivative that tracks the performance of the underlying asset.

Meanwhile, the Spanish regulator Comisión Nacional del Mercado de Valores (CNMV) also allows UCITS exposure to financial instruments with performance linked to crypto assets, provided they do not contain derivatives.

The Central Bank of Ireland (CBI) also has a cautious approach to crypto and does not allow indirect exposure to the asset class.

ESMA’s review of the eligible assets directive will also consider 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 doesn’t want to “rock the boat” with too many changes.

“We are aware of different national practices regarding the suitability of assets and believe it is crucial to encourage greater convergence,” he said.

‘Value for Money’ Rules?

The European Commission also gave an update on the EU’s Retail Investment Strategy (RIS), which has been facing negativity over the last few months.

The European Parliament voted to lift the ban on incentives from RIS, which had already been significantly diluted to only recommend the free sale of funds.

The move has pushed investors into higher-fee products and out of ETFs while also raising concerns about conflicts of interest.

“The role that retail investors play in ETFs is extremely important and that is why the Commission sought to address conflicts of interest in the investment journey when it adopted the RIS,” Bussieres said.

The story continues

“ETFs will particularly benefit from conflict of interest. “We want to avoid a situation where retail investors are recommended products that do not provide value for money.”

He added that it was now up to the European Parliament and the Council to negotiate the final outcome, but warned: “If we do not manage to solve all the problems through the RIS, we may have to use different tools in the future.”

“There are likely to be slightly shortened terms compared to those we proposed in our initial texts… but I’m sure the issue will come up again,” he said.

This article was first published on etf.com’s sister publication ETFStream.com.

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