EU Regulator Urged to Standardize Crypto Rules for ETFs Amid Fragmented Regional Regulations

21Shares, a leading crypto investment firm, has urged the European Securities and Markets Authority (ESMA) to introduce unified regulations for incorporating cryptocurrency into UCITS (Undertakings for Collective Investment in Transferable Securities) funds. This call comes as Europe slowly rolls out its much-anticipated MiCA (Markets in Crypto Assets) regulation.

In an October 7 statement, 21Shares highlighted the current inconsistency in the regulatory landscape, which it claims is causing confusion among retail and institutional investors. While some EU countries, such as Germany and Malta, permit UCITS funds to hold cryptocurrency, others, including Luxembourg and Ireland, do not.

The firm is advocating for ESMA to establish comprehensive guidelines that would allow UCITS funds across all EU member states to gain indirect exposure to cryptocurrencies. According to 21Shares, such regulations would not only safeguard investors but also expand access to crypto investment opportunities.

The push for regulatory clarity comes as ESMA evaluates feedback from its recent consultation on the inclusion of new asset classes, like crypto, in UCITS funds.

MiCA’s Gradual Rollout

21Shares’ request coincides with the phased implementation of the EU’s MiCA regulation, which marks a significant milestone as the EU becomes the first major region to introduce a comprehensive legal framework for cryptocurrency. MiCA aims to create a unified rulebook for digital assets, balancing investor protection with fostering innovation.

Under MiCA, crypto service providers are required to obtain authorization from one of the EU’s national financial regulators to operate within the bloc. The regulation has already had a notable impact, particularly in the stablecoin sector. Some companies, including Coinbase, have announced plans to delist stablecoins that do not meet MiCA’s requirements by the end of 2024. While crypto exchanges are adapting to MiCA’s guidelines, funds remain without clear direction.

21Shares' call to action underscores the need for greater regulatory coherence to fully realize the potential of crypto investments within Europe.