On 4 April 2023, the Central Bank of Ireland (Central Bank) published a revised edition of its Q&A on AIFMD and its Q&A on UCITS in which it set out its revised position on the ability of Irish domiciled funds to gain exposure to "digital assets", often referred to as "crypto assets".
It is worth noting at the outset that the Central Bank has made clear that for the purposes of its guidance, "digital assets" refers to digital assets which are based on an "intangible or non-traditional underlying" and does not include investments which are tokenised traditional assets whose value is linked to an underlying traditional asset or pool of assets. Digital assets falling within the scope of the Central Bank rules will therefore for example include investments in crypto currencies or NFTs1.
The table below sets out the Central Bank's revised rules on investment in digital assets.
Type of Fund |
Type of Exposure to Digital Assets |
Central Bank Position |
Requirements imposed by the Central Bank |
All QIAIF Funds |
Direct exposure |
Not permitted until it is satisfied depositary safe-keeping rules can be satisfied |
|
Open-ended QIAIF |
Indirect exposure |
Permitted subject to applicable conditions being met |
|
Closed Ended QIAIF/Open Ended QIAIF with Limited Liquidity |
Indirect exposure |
Permitted subject to applicable conditions being met |
|
UCITS Funds |
Direct exposure/Indirect exposure |
Exposure to digital assets not currently permitted |
N/A |
RIAIF Funds |
Direct exposure/indirect exposure |
Exposure to digital assets not currently permitted |
N/A |
In a separate development relating to investment in tokenised
traditional assets, under amendments made to the Irish MiFID
Regulations2 which became effective on 23 March 2023,
the definition of a "financial instrument" now includes
any "financial instrument" listed in Schedule 1 to the
Irish MiFID Regulations which is issued by means of distributed
ledger technology. This paves the way for Irish funds to now
potentially invest in tokenised financial instruments subject to
applicable product rules.
Footnotes
1. Since July 2022, the Central Bank had permitted Irish QIAIFS to invest up to 10% of net assets in cash-settled Bitcoin futures traded on the Chicago Mercantile Exchange without any requirement to make a pre-submission to the Central Bank. However, the revised Q&A on AIFMD published on 4 April 2023 provides for the potential to invest in a much broader range of digital assets subject to the conditions imposed by the Central Bank being satisfied.
2. European Union (Markets in Financial Instruments) (Amendment) (No.4) Regulations
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