UK asset manager withdraws from XRP ETP over compliance issues

UK-based asset manager, Jupiter Asset Management has decided to pull out its investment from an XRP exchange-traded product (ETP) managed by 21Share, due to compliance concerns.

As reported by the Financial Times, the decision follows a $2.57 million investment made by Jupiter’s Ireland-based Gold & Silver fund in the first half of 2023, which was later flagged during the company’s standard oversight process. The compliance team’s intervention led to the withdrawal of the investment, incurring a minor loss of $834, which the company claims to have fully recovered.

The move to cancel the ETP investment stems from regulatory restrictions in Ireland against crypto exposure for funds operating under the UCITS (Undertakings for the Collective Investment in Transferable Securities) framework. UCITS sets forth guidelines for mutual funds to be marketed across the European Union. While these funds are allowed to allocate up to 10% of their portfolio to illiquid assets, there’s a lack of consensus among European regulators regarding investments in cryptocurrency-related products.

Prior to this incident, Jupiter’s Gold & Silver fund had included crypto investments in its portfolio, before the Irish authorities clarified their position against such investments. Regulatory bodies in Ireland, France, and the UK have all stated that UCITS funds are prohibited from investing in crypto assets. Conversely, Germany has shown a more lenient stance, permitting UCITS funds to invest in crypto ETPs under specific conditions that ensure the product accurately mirrors the value of the underlying crypto asset.

On its official Q&A page, 21Shares noted the ambiguity surrounding the eligibility of its ETPs for UCITS funds, stating that there is “no conclusive answer” but suggesting that their products “could be considered eligible” based on their assessment.