Crypto in Germany Goes Mainstream Following the Enactment of ‘Spezialfonds’ Law

Germany has recently enacted groundbreaking legislation that observers say has the potential of mainstreaming crypto investments. The law that had been in the works since April this year came into force on July 1, 2021. It allows select institutional funds to allocate part of their portfolio to digital assets.

In the law targeting the ‘Spezialfonds,’ firms can structure their capital to include an up to 20 % allocation in crypto. Currently, the special funds manage assets worth approximately $2.1 Trillion. And the move may have big implications on the sector.

A Win For Crypto

According to analysts, the spezialfonds will reap big from the new law’s enactment. Clemens Schuerhoff, chair of Kommalpha, a financial consulting firm, says it’ll help the firms rope in $415 Billion in new crypto investments. But that’s only if they were all to max out on their permitted allocation.

It’s a thought that Philip Pieper of German Defi firm Swarm Markets affirms too. Weighing in on the subject via email, he held that the development was a win globally for Blockchain and crypto enthusiasts. Furthermore, he stated that introducing such a large pool of funds will profoundly affect the sector.

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Cautious Adoption

The sector has nevertheless welcomed the news with cautious optimism. There’s agreement that it’s still early days yet to realize the benefits of the move. Though not denying the boom that may result from the legislation, most Spezialfonds are still learning the crypto market and have yet to consider it an investment firm.

Tim Kreutzman, a crypto asset expert, supports the notion that most funds will be cautious in adopting cryptos, at least in the short term. He suggested that most funds would stay below the 20% mark. He alluded that this would arise from the need for the funds to balance their regulatory obligations with their entry into the space.

Another analyst Kamil Kaczmarski of management consultancy fund Oliver Wyman LLC thinks that many funds would experiment with digital assets in the next five years. They’ll do that at low levels, not anywhere near the threshold. He further said that the traditionally conservative German investors might be discouraged by the volatile nature of crypto assets. 

Reclaiming Germany’s Spot

DWS Group, which is Deutsche Bank AG’s asset manager, said they were monitoring the developments. However, they didn’t have plans to offer crypto buying funds by the time of going to press. It’s a wait-and-see situation at DekaBank too. One of Germany’s largest asset managers, the firm has long considered venturing into digital currencies. But its spokesperson avers that it hasn’t decided on when to do so yet.

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Too Many, the new laws are the first step towards Germany reclaiming its reputation for being the top market for crypto trade in the EU. In the past, investors have opted for the “crypto valley” Liechtenstein and Switzerland owing to those destinations’ favorable tax laws.