German Law Allowing “Spezialfonds” Holding $1.8 Trillion to Invest 20% in Crypto Goes into Effect
The financial wealth of Germans has also grown strongly in recent years despite historically low interest rates to a record almost 7 trillion euros, with DZ Bank expecting people to save less than in 2020.
A new law in Germany, Fund Location Act introduced in April, now permits Spezialfonds, or special funds, to invest as much as 20% of their portfolio in cryptocurrency.
The law that came into effect today, July 1st, could ideally see up to €350 billion ($415 billion) flow into the crypto market should every Spezialfond choose to allocate the entire 20% of their portfolio in crypto.
“This is damn huge,” Sven Hildebrandt, CEO of Germany-based Distributed Ledger Consulting (DLC), said in an interview back in April. Around €1.2 trillion ($1.8 trillion) is invested into Spezialfonds, and “right now, 0% of the funds are invested (in cryptocurrencies) because they're just not allowed.”
In comparison, Bitcoins’ market cap is about $630 billion, and the total cryptocurrency market cap is about $1.44 trillion.
A popular institutional investment fund in Germany, this measure has been hailed as a big boost to the country’s position as a financial investment hub that would further legitimize the asset class.
This law applies to both existing Spezialfonds, the largest investment vehicle in the country, and any new ones that are set up by institutional investors, including financial institutions, pension funds, and insurance companies.
At the beginning of 2020, Germany also introduced a law that allows banks to sell and store cryptos.
Additionally, Financial Services company ETC Group was the first to launch a Bitcoin ETP on the German stock exchange last year, after its financial regulator, BaFin recognized cryptocurrencies as financial instruments.
Interestingly, the financial wealth of Germans has also grown strongly in recent years despite historically low-interest rates. Last year, private financial assets increased by almost 7% to a record value of almost 7 trillion euros ($8.3 trillion).
This takes into account cash, securities, bank deposits, and claims against insurance companies.
According to DZ Bank economists’ forecast, the financial assets of households in Germany should increase to almost 8 trillion euros by the end of 2022.
DZ Bank economist Michael Stappel also expects people to save less than in 2020 due to increased relaxation of the restrictions imposed to curb coronavirus. Last year, due to lockdowns, households were forced to save while more and more banks introduced negative interest rates on savings deposits. As a result, Germans invested more in stocks than ever before.