The regulatory background of cryptocurrencies is almost ready for corporate investments. The commercial banks and fund management companies of the European Union are preparing themselves for being key players in the emerging cryptocurrency space with launching their own crypto funds. Especially digital assets and crypto currencies are becoming increasingly attractive to institutional investors and commercial banks show a significant appetite for crypto currencies for their asset management processes.
These crypto funds will be composed with different crypto currencies and target semi-institutional and institutional investors. The main motivations behind being in crypto assets markets are using innovative investment vehicle, cost-effective and secure access to crypto types, and breaking down informational and execution barriers for retail traders. Within this framework, the global crypto asset management market size is projected to grow from USD 0.4 billion in 2020 to USD 1.1 billion by 2025 (Mehra, 2020).
The first step of financial services companies was building a digital asset sub-division and offering enterprise-grade custody and execution services for institutional investors who want exposure to digital assets. With this purpose institutional investors are gathering different crypto assets through custody and trading projects on digital asset trading platforms and designing straightforward tools for managing crypto portfolios. Nowadays fund management companies mainly focus on high-speed blockchains, ICOs, reverse-ICOs, decentralised protocols, and further advantages of digital assets as well. As a preferred option in the crypto market, Bitcoin come out as an important alternative to the established and centralized financial system. It was launched in the midst of the financial crisis of 2008 and has grown ever larger and pulling traditional players into the digital asset space.
Another key step for the digital asset management framework is building a brand new risk management and internal control system within the fund management body. Because of the centralized controlling functions, institutional investors are establishing multiple projects touching on cryptocurrencies including anti-money laundering solutions and other risk mitigation techniques.
European Union financial markets are witnessing a rapid maturation of the digital asset markets. In Euro Zone, especially Germany is acting as a pioneer for building a legal framework for financial institutions. For this purpose, Germany’s Federal Financial Supervisory Authority, BaFin, classified cryptocurrencies as financial instruments in November 2019 and positioning blockchain for asset management as a future. Right now more than 40 German banks are now using BaFin’s approval to offer digital asset custody services in the country.
Even if digital asset portfolios are still immature and include many unidentified risks for corporate and individual investors, fund management companies agree on their limitless potential. We will touch on more points about new insights in digital currency markets in the following articles. For any further questions, please reach us via firstname.lastname@example.org or visit our CryptoIndexSeriesTM Platform for a better analysis of the crypto market space.
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