CBI Approves Indirect Exposure to Crypto Assets for Two Regulated Funds

PUBLISHED: 21st April 2022

A First for Regulated Irish Funds

On 31 March 2022, the Irish Funds Industry Association announced that the Central Bank of Ireland had approved, in principle, two qualifying investor alternative investment funds (QIAIF) with a low level of exposure to cash settled Bitcoin futures, trading on the Chicago Mercantile Exchange.

It is the first time the Central Bank has ever permitted an indirect exposure to cryptocurrencies for a QIAIF.

Pre-submission Reminder

Promoters of regulated investment funds are reminded that, pursuant to the Central Bank’s AIFMD Q&A (Q&A), a pre-submission to the Central Bank must be made where exposure to crypto-assets is proposed for a QIAIF. In that regard, the Central Bank has stated that the manager of the QIAIF must be able to demonstrate that it can effectively manage the risks posed by the QIAIF’s exposure to crypto assets.

See our article here for further information regarding the Central Bank’s pre-submission expectations.

A Step in the Right Direction

The Central Bank’s approval is a positive step in the right direction for promoters looking to use a QIAIF structure to gain exposure to crypto assets. It is possible that such an approval may open the door for future applications to seek exposure to crypto-assets, including exchange traded notes or shares that reference a crypto-asset as the underlying, for example. This does come with the likely qualification (for now) that the Central Bank may only be willing to grant an approval for low-levels of indirect exposure to crypto-assets.

The Central Bank has stated in its Q&A that its position will be kept under review and will continue to be informed by European regulatory discussions.

Looking Ahead

If you have any questions regarding the regulation of crypto assets in Ireland and/or are contemplating the establishment of a fund that seeks to gain exposure to crypto assets, we can be of assistance.

Please contact David Naughton at dnaughton@lkshields.ie for further information.