Industry Updates

Jupiter blocks investment into 21Shares crypto ETP – report

Divergence among European regulators complicates crypto exposure

Lauren Gibbons

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Jupiter Asset Management's compliance department has blocked an investment into a cryptocurrency exchange-traded product (ETP) in one of its Irish UCITS funds.

The fund manager’s €565m Gold & Silver fund had invested $2.5m in the 21Shares Ripple XRP ETP (AXRP) during the first half of 2023, the Financial Times reported.

However, the investment was picked up by the company’s “regular oversight process” and was subsequently cancelled – at a loss of $834 – due to the Central Bank of Ireland (CBI) prohibiting crypto holdings in UCITS funds.

Jupiter said there was no regulatory intervention from the CBI or impact on the fund.

It highlights the ongoing challenges of varied regulatory stances across Europe.

UCITS funds can hold up to 10% of their portfolio in illiquid assets, however, there is divergence among European regulators on whether those funds can invest in crypto ETPs.

Both the CBI and the Autorité des Marchés Financiers in France have expressed their discomfort at UCITS funds holding crypto.

The UK takes the same approach as Ireland while other European jurisdictions, like Germany, allow investment funds to hold crypto.

For example, German asset manager DWS has a €24m fintech fund that has held the VanEck Ethereum ETN (VETH) since late 2022, according to the Financial Times.

A DWS spokesperson said it has “a selected number” of multi-asset funds that can invest in crypto, but none of its institutional mandates or multi-asset funds currently invest in the asset class.

The Securities and Exchange Commission’s (SEC) approval of spot bitcoin ETFs earlier this year has helped crypto to become more widely accepted as a large-scale traditional investment and fund managers are increasingly looking to hold crypto assets in funds.

Inflows into ETPs tracking crypto more than doubled year-on-year to $2.3bn in 2023, up from $830m in 2022, according to CoinShares data.

In light of rising exposures to specialist asset classes such as crypto across Europe, the European Commission instructed the European Securities and Market Authority (ESMA) last July to gather data on UCITS specialist asset class exposure since the rules were first introduced in 2007.

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