By
Chimamanda U. Martha
April 26th, 2024
The rationale behind the cancellation stems from regulatory constraints, specifically pertaining to the prohibition of crypto exposure in funds governed under Undertakings for the Collective Investment in Transferable Securities (UCITS ) by Irish authorities.
Jupiter Fund Management Plc (LON: JUP), a London-based asset management firm has found itself entangled in compliance issues, leading to the cancellation of its investment in a Ripple XRP Exchange-Traded Product (ETP).
Jupiter’s Ripple XRP ETP Investment
According to a report by the Financial Times, Jupiter’s Ireland-based Gold & Silver fund had purchased $2.57 million worth of 21Shares’ Ripple XRP ETP in the first half of 2023. However, this investment was short-lived as it was swiftly detected by the company’s routine oversight process, prompting the compliance team to order the fund to withdraw its holdings.
The decision to divest from the Ripple XRP ETP resulted in a loss of $834, with Jupiter selling off the crypto ETP holding for $2,570,670, as per the report. Nonetheless, the firm has covered the shortfall, as confirmed by a spokesperson.
The rationale behind the cancellation stems from regulatory constraints, specifically pertaining to the prohibition of crypto exposure in funds governed under Undertakings for the Collective Investment in Transferable Securities (UCITS ) by Irish authorities.
UCITS, a regulatory framework facilitating the cross-border sale of mutual funds across European Union member states, imposes restrictions on the types of assets funds can hold. While UCITS funds can allocate up to 10% of their portfolio to illiquid assets, the permissibility of investments in products containing cryptocurrencies varies among European regulators.
Notably, Ireland, France, and UK regulators have explicitly stated that UCITS funds cannot invest in crypto assets, contrasting with Germany’s more lenient stance which permits investments in crypto ETPs under certain conditions.
Meanwhile, Jupiter’s Gold & Silver fund had previously held crypto investments before the Irish government’s announcement regarding crypto investments, emphasizing the evolving regulatory ecosystem surrounding digital assets.
In response to the situation, 21Shares, the issuer of the Ripple XRP ETP, explained on its official Q&A page that the eligibility of its ETPs for UCITS funds is not conclusively determined. While the products could potentially meet the criteria, there remains uncertainty regarding their compatibility with UCITS regulations. On the other hand, Jupiter Asset Management has yet to provide further comment on the matter.
Ripple’s Strategic Move amid Legal Challenges
In a separate development, Ripple has announced its strategic move to enhance its presence in the United States. Despite facing legal challenges from the US Securities and Exchange Commission (SEC) regarding XRP, Ripple acquired digital assets custody firm Standard Custody & Trust Company. This acquisition is aimed at strengthening Ripple’s regulatory compliance in the US market.
Through the acquisition, Ripple has obtained additional licenses in the US, including a limited-purpose trust charter and money transmitter licenses. These licenses are expected to strengthen Ripple’s regulatory portfolio, enabling the company to operate in compliance with local regulatory obligations in the United States.
While the financial terms of the acquisition were not disclosed, Ripple stated that the deal is subject to approval by US authorities.