On 4 April 2023, the Central Bank of Ireland published the 47th Edition of the AIFMD Q&A (the Q&A) clarifying investment limits for qualifying investor alternative investment funds (QIAIFs) holding indirect exposure to digital assets.
The investment limits for QIAIFs seeking indirect exposure to digital assets are as follows:
This is a welcome update and effectively removes the pre-submission requirement for QIAIFs seeking to gain indirect exposure to digital assets within the above limits. The pre-submission process (set out here) will still be required for QIAIFs proposing to invest indirectly in digital assets in excess of the above limits or any direct investment in digital assets.
In order to avail of these investment limits, the following requirements, as set out in ID1145 of the Q&A, apply:
The Q&A provides that direct investment in digital assets is not permitted until such time as it is demonstrated to the Central Bank that a depositary can meet its obligations under AIFMD to provide custody or safe-keeping services to digital assets. In respect of indirect investments in digital assets, how a depositary can demonstrate its obligations will be tested but we imagine that it can be achieved where a depositary can facilitate indirect investment in digital assets through, for example, the use of derivatives.
The Q&A also clarifies that, for the purposes of the Central Bank’s guidance, “digital assets” refers to digital assets which are based on an “intangible or non-traditional underlying” and does not include investments which are considered tokenised traditional assets (whose value is linked to an underlying traditional asset or pool of assets (such as financial instruments or commodities)). As such, digital assets falling within the scope of the Central Bank rules would include investments in crypto currencies.
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