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Investing in digital assets has resurfaced in popularity, particularly since the bull run in BTC and altcoins, and has been brought to the attention of the general public by the media.

However, regulations have hampered the investing behavior of funds in digital assets in the German-speaking region so far. With the new German Fund Location Act and other laws, this might change, and Germany could become a leader in the sector of digital assets. In research conducted by an industry-related collaboration, the extent to which this is expected and which underlying factors are decisive were investigated.

Scientists from MINDSMITH, OnGrid System, DEKIS, and Tiger formed a working group. Trade researched the interest of investment funds in digital assets and DeFi solutions. Experts and officials from more than 70 investment funds from the DACH area (Germany, Austria, and Switzerland) were polled. The probe was timed to coincide with the new German “Fund Location Act” (FoG-E), which has permitted domestic special funds to invest up to 20% of their managed assets in digital currency assets like Bitcoin since August 2, 2021.

According to the June 2021 survey findings, 88 percent of DACH-focused investment funds have not yet invested in digital assets, although over half of all fund representatives asked are interested in learning more about them. In addition, 7% of respondents want to begin by the end of 2021, while 4% have already invested in digital assets. Although 4% may not appear to be much at first look, it represents a significant achievement for a sector that is still relatively new and has a conservative market environment.

On the other hand, regulatory uncertainty is cited by 86 percent of those polled as a barrier to investing in digital currency. Regulatory ambiguity makes it difficult to act and make investments. However, in this field, Germany has achieved tremendous success as a pioneer. Regulations are governing the introduction of electronic securities, securities oversight, and, as previously said, fund location. Beyond the restrictions, however, more than half of the respondents saw a lack of service providers and infrastructure as further barriers. In this way, the market is likewise evolving.

Volatility, present unappealing price entry levels, and a lack of conviction in the value of digital assets are all identified in the survey as further roadblocks.

Another FinTech innovation has developed as a result of blockchain technology: Decentralized Finance (DeFi), which uses smart contracts to allow transactions or investments to take place without the involvement of a third party. Up to 14% of respondents said they might see themselves employing DeFi solutions in the future. Stablecoins (digital coins related to fiat money) may also be utilized as the foundation of a controlled DeFi ecosystem, but the question is to what degree. For example, this might be done using a digital euro, dollar, yuan, or other central bank digital currencies (CBDCs).

Over the next three years, the DACH area might see an investment flow of $100 billion to $657 billion in the digital currency sector.

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