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The Central Bank of Ireland (Central Bank) recently issued the 40th edition of the Central Bank’s AIFMD Q&A and the 32nd edition of the Central Bank's UCITS Q&A. The new Q&As set out the Central Bank’s position with respect to Retail Investor AIFs (RIAIFs), Qualified Investor AIFs (QIAIFs) and UCITS gaining exposure, both directly and indirectly, to crypto-assets.

For the purposes of the Q&As, the Central Bank makes a distinction between crypto-assets that are a digital representation of “traditional assets” and crypto-assets that are “based on an intangible or non-traditional underlying”. Examples of traditional assets include financial instruments and commodities. The Q&As only address the latter non-traditionally linked crypto-assets.

The Central Bank acknowledges that these types of crypto-assets are volatile and are high risk in nature for all types of investors. The risks specifically noted by the Central Bank include:

  • Liquidity risk

  • Credit risk

  • Market risk

  • Operational risk including fraud and cyber risks

  • Money-laundering / terrorist financing risk, and

  • Legal and reputation risks

The Central Bank confirms that it must be satisfied that direct or indirect exposure to crypto-assets is capable of being appropriately risk managed. The Central Bank makes a clear distinction between qualifying investors and retail investors in framing how the Central Bank will assess crypto-asset risk exposure.

The Central Bank is highly unlikely to approve a UCITS or RIAIF proposing any exposure (either direct or indirect) to crypto-assets. The Central Bank’s view is predicated on the basis that crypto-assets are volatile and that retail investors may not be able to appropriately assess the risks of making an investment in a fund which gives crypto-asset exposures.

However, the Central Bank does leave the door open for QIAIFs seeking to gain exposure to crypto-assets. The Central Bank states that a QIAIF seeking authorisation to invest directly or indirectly in crypto-assets would need to make a submission to the Central Bank outlining how the risks associated with such exposures could be managed effectively by the AIFM.


Given the risks associated with crypto-assets, it is not surprising that the Central Bank has taken a conservative approach towards prospective investment in crypto-assets. The update provided by the Central Bank provides some clarity for the funds industry for an asset class that continues to spark interest and debate among commentators.

The Central Bank’s approach in relation to crypto-assets will be kept under review, continue to be informed by European regulatory discussions on the topic and may change should new information or developments emerge in the future.

If you would like to discuss the above or you are considering setting up a QIAIF which invests directly or indirectly in crypto-assets, please contact a member of our Investment Funds team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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