The Central Bank of Ireland said it is unlikely to approve investment funds for retail crypto investors because they lack the know-how to navigate the asset class high risk.
The February 2022 report Securities Markets Risk Outlook Report: A Changing Landscape describes crypto assets as a new product offering in securities markets that is complex and a “potential threat to investor protection.”
Although the bank answered many questions last year about alternative investment funds (AIFs) relating to crypto, there are no longer plans to approve an AIF for retail crypto investors. The bank believes that such investments “may be suitable for wholesale or professional investors”, but are too complicated for small fish:
“It is highly unlikely that the Central Bank will approve a retail investor UCITS or AIF offering exposure to crypto-assets, given the specific risks attached to crypto-assets and the possibility that an appropriate risk assessment can be difficult for a retail investor without a high degree of expertise.”
A UCITS is an undertaking for collective investment in transferable securities which is used in the European Union (EU) as a regulatory framework for the management of certain investments for sale in the EU.
Ireland’s director of securities and market surveillance, Patricia Dunne, explained the bank’s thinking to Bloomberg on February 8, saying there were “too many unanswered questions about things like custody, money laundering, and even just volatility and liquidity” regarding retail crypto investing. .
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Regulatory attitudes towards crypto in the neighboring UK are not much more favourable, with Her Majesty’s Revenue and Customs (HMRC) recently setting tough new guidelines for DeFi taxation. There, crypto-generated income earned through staking is considered property and therefore subject to capital gains tax.
Yesterday, the Russian government agreed on a regulatory scheme that will allow residents to trade crypto. Crypto will be treated as a “currency analogue” rather than currency itself, and any transactions over approximately $8,000 must be reported.