Germany's "Fund Location Act" officially launched, expected to attract up to $400 billion USD into the crypto market

A new German law called the "Investment Fund Location Act" came into effect on 7/1, allowing all professional investment funds to invest up to 20% of their assets in cryptocurrencies, potentially unlocking up to $415 billion of new capital inflow into the crypto industry.

"Investment Fund Positioning Law"

The "Investment Fund Positioning Law" was introduced in April of this year and shortly after received approval from the German parliament, granting professional investment funds in Germany more discretion. Fund managers of specialized funds, known as Spezialfonds, are now allowed to allocate up to 20% of the fund's assets to cryptocurrency.

According to the analysis by Sven Hildebrandt, CEO of consulting firm Distributed Ledger Consulting (DLC), if all "special funds" allocate the maximum 20% limit of funds to crypto assets, it could bring in $415 billion into the crypto market.

While it may not be feasible for every specialized fund to allocate funds to crypto assets, given the potential high returns of cryptocurrencies, fund managers may still be incentivized to allocate some assets to this sector.

Coinbase Offers Custody Services in Germany

Coincidentally, the law was passed shortly after Coinbase was granted permission to offer custody services in Germany. According to an announcement from the German financial regulatory authority, BaFin, Coinbase obtained a crypto custody license in Germany on 6/28.

In 2019, the German parliament passed a law requiring crypto custodial institutions to apply for new licenses or cease operations in the country. The new law took effect on January 1st of last year, including precise guidelines for institutions providing crypto services. Coinbase is the first company to receive this license, making its compliance actions a model for other crypto companies.

Despite the post-listing hype and subsequent drop in stock price for Coinbase, which has nearly halved from its peak, Ark Invest's Cathie Wood remains extremely bullish on Coinbase and continues to buy in.

Coinbase is also expanding its business scope, with various breakthroughs in product planning, including announcing plans to list all compliant cryptocurrencies and venturing into CeFi by launching a USDC yield product with a 4% annualized return.