Luxembourg Allows Retail Investment Funds Limited Crypto Exposure Under New Rules
- UCITS funds can now gain up to 10% crypto exposure through ETFs and ETPs.
- Direct crypto holdings are still not allowed, ensuring a cautious, regulated approach.
Luxembourg’s financial regulator has confirmed that UCITS investment funds can now gain limited crypto asset exposure under strict conditions. This step brings cryptocurrency to the mainstream of investing. On February 4, Luxembourg’s financial watchdog, Commission de Surveillance du Secteur Financier (CSSF), announced the decision.
What has changed
Under the new guidance, UCITS funds may invest up to 10% of their portfolio in crypto-related assets, but they cannot buy them directly; instead, they can invest through regulated financial products such as ETFs or ETPs. These products must already meet strict regulatory rules.
UCITS are one of the most widely used regulated investment funds in Europe by retail investors and pension funds. It is known for its strong investor protections with clear rules. Europe’s largest fund hub, Luxembourg, manages trillions of euros in UCITS. As a result, the regulatory decisions will influence the wider European market.
The European Securities and Markets Authority (ESMA) stated that limited indirect crypto exposure can fit within UCITS rules under approved financial securities in 2025. By adopting this approach, Luxembourg aims to provide clarity to the fund managers and to reduce uncertainty around crypto-linked investments.
What this meant for both Retail investors and Asset managers
For the retail investors, crypto exposure will be small and controlled. It will likely be presented as a diversification option, and the risk limits under UCITS rules are unchanged. For the asset managers, this move allows them to carefully develop products and no need to create high risks. They can now add limited crypto exposure to the cap and can use well-regulated ETFs and ETPs. This decision shows the broader shift in the approach towards crypto, and it will no longer be treated as completely outside the financial system.
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