Germany Deliberates on Tokenized Mutual Funds Shares
After passing a law that allows institutional funds (Spezialfonds) in the country to commit only 20% of their portfolios to Bitcoin investments, Germany is perfecting plans to introduce tokenized shares. A regulation is being drafted for the initiative. The Ministry of Finance has also called for comments from members of the public within the country and the window for the public consultation closes by October 1st.
Blockchain technology will be very useful for the tokenized shares as units of the shares will be deployed on it. The proposed shares will offer investors protected exposure to Bitcoin just like other derivatives of the digital asset such as exchange-traded funds (ETF). However, economic and financial experts have cautioned that this could spell doom for Germany’s economy if other European countries turned to tokenization as well.
Germany Embraces Blockchain Technology and Cryptocurrency
Tokenization pools a number of shares into one such that a token could contain as many as 10 shares. This helps reduce the cost of administration and also lowers the barrier to entry for retail investors. The latest move signals the adoption of blockchain and cryptocurrency by Germany. Germany used to be neutral to cryptocurrencies until its decision in August to open the broad way for Institutional Funds locally known as Spezialfonds to invest in flagship cryptocurrency, Bitcoin.
However, industry experts predicted following the law that it might take another 10 years for each institution to utilize up to 2% in its portfolio for Bitcoin given that Bitcoin and other cryptocurrencies are extremely volatile. They had also predicted that up to $400 billion would be invested in the crypto market.
Union Investment To Attempt Bitcoin Investment
Meanwhile, Union Investment, a global investment based in Frankfurt, revealed on Monday that it would add Bitcoin to one of its investment funds. However, it noted that it will limit the allotment to between 1% and 2% since only a few of its private investors would be interested in the digital asset.
Although Union Investment stated that the Bitcoin fund will be opened in Q4, 2021, no specific date was given. The firm boasts over $400 billion under management. Equities constitute about 80% of its fund.
A Euro-based CBDC is also in the works for member states of the EU including Germany. Back in June, the European Central Bank (ECB) announced via its chairman Christine Lagarde that a CBDC is likely to take four years or more before it can be issued.
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