Investing in digital assets is all the rage again, especially since the bull run of BTC and altcoins, and has gained more public awareness through the media. In the German-speaking region, the investment behavior of funds in digital assets has so far been somewhat restrained by regulation. However, that could change with Germany’s new fund tracking law and other legislation and could even make Germany a pioneer in the digital asset arena. The extent to which this is to be expected and what underlying criteria are decisive were examined in a study conducted by an industry-related consortium.
A working group with scientists from MINDSMITH, OnGrid System, DEKIS and Tiger.Trade conducted a study on investment funds and their interest in digital assets and DeFi solutions. Experts and representatives of over 70 investment funds representing the DACH region (eg Germany, Austria and Switzerland) were interviewed. The investigation coincided with the new German Fund Location Law (FoG-E), which, as of August 2, 2021, allows national special funds to invest up to 20% of their managed assets in currency assets. digital such as Bitcoin.
The results of the June 2021 survey show that 88% of DACH-focused investment funds have yet to invest in digital assets, but nearly half of all fund representatives surveyed would be interested in them and would like come back to this in more detail. 7% of respondents plan to start up by the end of 2021 and 4% are already invested in digital assets. While 4% may not seem like much at first glance, a good step has already been taken for a rather conservative market landscape with a relatively young investment area.
For 86% of those surveyed, however, regulatory uncertainties are also one of the barriers to investing in digital currency. Regulatory ambiguities raise concerns about not taking action and making investments. However, it is precisely this area that has made significant progress with Germany as a pioneer. There are the laws on the introduction of electronic securities, the law on securities supervision and, as already mentioned, the law on the location of funds. Beyond the laws, however, the lack of service and infrastructure providers is seen as an additional barrier for more than half of those surveyed. The market is also developing in this regard.
Volatility, currently unattractive price entry levels or lack of belief in digital asset values are among others mentioned as other obstacles in the study.
With blockchain technology, another innovation has appeared in the field of FinTech, namely decentralized finance (DeFi), in which, in combination with smart contracts, transactions or investments can take place without third parties. Up to 14% can currently imagine using solutions from the DeFi area in the future. The question is also to what extent stablecoins (digital coins linked to fiat currency) can be used as a basis in a regulated DeFi ecosystem. A digital euro, dollar, yuan, or other central bank digital currency (CBDC) could certainly be used for this.
Over the next three years, an investment flow converted into the equivalent of $ 100 billion to $ 657 billion could be expected in the DACH region digital currency market.
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