BaFin's Crackdown: Crypto Investment Rules for Asset Managers

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by Giorgi Kostiuk

a year ago

Germany's financial regulator, BaFin, is introducing stringent rules for asset management firms due to the rising popularity and risks of crypto investments.

New Rules and BaFin's Requirements

BaFin has issued a new circular, now open for consultation, outlining legal obligations for asset managers and custodians dealing with crypto investments. Asset managers must apply for an extension of their license to invest in crypto assets through Alternative Investment Funds (AIFs) if their current license does not cover such investments.

Obligations for Asset Managers

Before making crypto allocations, asset managers must adapt and test their investment processes and assess whether a crypto asset is an eligible investment. Companies must ensure they have adequate resources and skilled employees for handling cryptocurrencies. They should provide training for existing staff or hire external experts. At least one manager must have theoretical and practical knowledge of crypto assets.

Opportunities and Risks of Crypto Investments

Some investment funds can allocate funds to crypto assets, but these carry risks such as potential losses from hacker attacks. Spezial-AIFs, available to professional investors including pension funds, can invest in cryptocurrencies. Under the FoStoG, Spezialfonds can invest up to 20% in cryptocurrencies.

While cryptocurrencies offer new investment opportunities, the associated risks require stricter regulatory measures as implemented by BaFin.

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