Europe needs to change the rules on cryptocurrency to ensure a harmonised approach across the continent, according to Helene Bussieres, deputy head of asset management at the European Commission.
Speaking at ETF Stream’s ETF Ecosystem Unwrapped 2024, Bussieres (picured) said “harmonisation and convergence” were essential to stop national regulators from taking diverging 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 exposure crypto in UCITS.
“We are working on going as far as is responsible on changing the rules for crypto to introduce a more harmonised approach across the EU,” she said.
“We know that some National Competent Authorities (NCAs) take a relatively liberal approach compared to others that are a lot stricter, so what matters to us is harmonisation and convergence.”
German regulator BaFin allows UCITS funds to buy crypto exchange-traded notes (ETNs) on the delta one exemption, a derivative that tracks the performance of the underlying asset.
Meanwhile, the Spanish regulator – the Comisión Nacional del Mercado de Valores (CNMV) – also allows UCITS to have exposure to financial instruments with performance linked to crypto assets, provided they do not embed 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 assess structured and leverage loans, AT1 bonds, commodities, delta-one instruments and ETNs.
Bussieres added UCITS feedback from the industry has been positive so far and it does not want to “rock the boat” with too many changes.
“We are aware of diverging national practices regarding the eligibility of assets and we believe it is super important to foster more convergence,” she said.
‘Value for money’ rules still being negotiated
The European Commission also gave an update on the EU’s Retail Investment Strategy (RIS) which has faced headwinds over the past few months.
The European Parliament voted to remove a ban on inducements from the RIS, which had already been significantly watered down to advice free sales of funds only.
The move has raised concerns around conflict of interests while pushing investors into higher fees products and out of ETFs.
“The role retail investors play in ETFs is extremely important and that is why when the Commission adopted the RIS sought to address conflicts of interest in the investment journey,” Bussieres said.
“ETFs would particularly benefit from the conflict of interests. We want to avoid a situation where retail investors are recommended products that do not offer good value for money.”
She added it is now down to the European Parliament and Council to negotiate the final outcome, but warned, “if we do not manage to address all the problems through the RIS, we may have to look to using different tools in the future”.
“It is likely to be on slightly reduced terms compared to what we had proposed in our initial texts…but I am sure the topic will be back on the agenda,” she said.
