The European Union's securities watchdog, the European Securities and Markets Authority (ESMA), is exploring the possibility of integrating cryptocurrency assets into the €12 trillion ($12.8 trillion) investment product market, seeking expert opinions on the matter.

ESMA has reached out to industry experts to gather insights on whether Undertakings for Collective Investment in Transferable Securities (UCITS), a significant segment within the investment market valued at €12 trillion, could incorporate exposure to various asset classes, including crypto assets.

UCITS represent a diverse range of investment funds designed to simplify and safeguard investment transactions, encompassing mutual funds, exchange-traded funds (ETFs), and money market funds. While governed by EU regulations, UCITS also attract non-EU investors seeking diversified exposure.

Stakeholders involved with UCITS have until August 7 to provide feedback on the proposal. If approved, UCITS funds could emerge as prominent investment vehicles with exposure to crypto assets, potentially marking a significant milestone for mainstream adoption.

This initiative aligns with recent developments globally, including the approval of spot Bitcoin exchange-traded funds (ETFs) in the United States and Hong Kong, indicating a growing acceptance of crypto exposure within traditional investment frameworks.

Unlike dedicated crypto ETFs, UCITS investments encompass various fund types, each tailored to specific risk profiles and asset allocations. While there won't be standalone UCITS funds with 100% crypto allocation, the proposal envisions multiple UCITS funds incorporating a percentage allocation in crypto assets.

Nicolas Streschinsky, Head of DeFi at Trilitech and Tezos blockchain R&D and Entrepreneur Hub, highlighted the potential of integrating crypto assets into UCITS funds to expand the cryptocurrency holder base, particularly for utility tokens utilized in major blockchain networks.

However, existing EU regulations presently prohibit independent crypto-centric investment products, necessitating investor access through exchange-traded notes (ETNs). The European Union has maintained a stringent regulatory stance on crypto, exemplified by the Markets in Crypto-Assets Regulation (MiCA), a comprehensive framework governing crypto activities.

ESMA's consultation also delves into the potential implications of integrating specific cryptocurrencies into existing regulatory frameworks, considering factors such as MiCA compliance and market dynamics. As stakeholders weigh in on this pivotal decision, the outcome could shape the future landscape of crypto integration within traditional investment markets.