ne of the largest asset managers in the UK, Jupiter Asset Management, recently had to cancel a $2.58 million investment in an XRP exchange-traded product (ETP) due to regulatory issues. Jupiter's Gold & Silver fund had purchased shares in 21Shares' Ripple ETP during the first half of 2023.
However, according to a report from the Financial Times, the investment was later scrapped after being flagged through Jupiter's "regular oversight process".
Differing Crypto Rules in Europe
The reason given for canceling the investment was divergent crypto regulation in Europe. Specifically, Jupiter's Gold & Silver fund is domiciled in Ireland, where cryptocurrency holdings are prohibited for UCITS or other tradable investment funds.
Meanwhile, some other jurisdictions in Europe like Germany allow regulated investment vehicles to invest in digital assets. As the fund was subject to Irish regulatory guidelines, the position in the XRP ETP had to be unwound at a loss of around $834,000.
Highlighting a Patchwork of Crypto Laws
This situation highlights the complex regulatory landscape currently facing the crypto industry in Europe and beyond. With different rules in place country-by-country, portfolio managers must carefully consider where any crypto products are domiciled.
What's allowed in one nation may be banned just across the border. The lack of a coordinated framework for digital asset investing creates challenges for firms operating across international lines. As the crypto market continues to mature, harmonization of regulations will become increasingly important.
Implications as Institutional Adoption Grows
The scrapping of Jupiter's XRP investment also underscores the compliance responsibilities faced by large asset managers as institutional crypto adoption expands. With trillions invested globally, any regulatory missteps could be costly for firms and erode investor confidence.
As demand grows for crypto exposure from pensions and endowments, navigating an evolving web of rules will require diligence. Further regulatory clarity is urgained as digital assets continue entrenching themselves into mainstream capital markets and investment strategies.
