Emmanuel Gutton — “Bridges Need To Be Built Between The Fund And Tech Industry”

Emmanuel Gutton, Director of Tax & Legal at ALFI ( (Photo © ALFI)

How has digitalisation impacted the fund industry?

Digitalisation has been part of strategic discussions for several years now, and in particular at a governance level of many funds or investment fund managers. At ALFI, we have established various forums and working groups which facilitate and generate collaborations with fund industry stakeholders on this topic. Currently, digitalisation is impacting the asset management industry in several dimensions.

The first one is that it generates investment opportunities. The crypto assets are viewed as a new asset class (although we are confronted with definition and classification challenges). To which extent and under which conditions can this asset class can be part of investment fund portfolios? Currently, most of the mainstream interest is devoted to crypto-currencies applications, but it could also quickly expand depending on the investor’s appetite.

Secondly, digitalisation in the asset management industry also means supporting innovation and enhancing the efficiency of core investment management functions, particularly on the distribution side of investment firms which may be highly disrupted by the use of the Distributed Ledger Technology (DLT).

Can a Luxembourg fund already invest in crypto-assets?

 For now, only alternative investment funds (AIFs) which are marketed solely to professional investors can invest directly in virtual assets. They need to be managed by an authorised AIFM and the project needs to pass before the CSSF. UCITS, i.e. the category of funds which can be distributed publicly to retail investors across the EU cannot invest in crypto-assets.

At this point in time, to our knowledge no regulated Luxembourg AIF invests directly into virtual assets but we are informed of several ongoing initiatives. A recent LHoFT and PwC survey to which ALFI actively participated confirms that there are real aspirations in this domain. We are looking forward to seeing the launch of the first regulated AIF investing directly in crypto-assets, hopefully in 2022.

“[…] 2022 is definitely the year of regulation for the digital world especially at a European level. I may refer to the DLT and MiCA”

Emmanuel Gutton, Director of Legal & Tax at ALFI

In your view, what are the key leverage points that will enable the emergence of a “crypto fund” in Luxembourg?

The first one in my view is the definition of a clear, competitive and sustainable legal and regulatory framework providing a clear picture to establish business plans and forecasts. Secondly, a vibrant network of daring and resourceful innovators ready to implement new value propositions and ideas is needed. Lastly, bridges need to be built between the fund and tech industry and a common language needs to be adopted.

What do you think about the current regulatory trend in the digital world? In this context, where do you see your ALFI’s role in terms of anticipation and support?

I will say that 2022 is definitely the year of regulation for the digital world, especially at a European level. I may refer to the DLT Regime aiming at regulating the tokenisation of financial instruments, and MiCA (Markets in Crypto-assets) regulating crypto-assets that are not financial instruments such as the famous crypto currencies and which just entered into the trilogue step of the legislative process. -. Concerning ALFI’s role, we published a position paper in June 2021 and responded to a series of consultations such as the one published by the European Securities and Markets Authority (ESMA) on the DLT Pilot Regime in March 2022. Furthermore, with the help of its members, ALFI contributes extensively to the constructive dialogue put in place by the various public bodies and we provide expert views and perform some advocacy work to promote the messages of the industry.

This article was first published in the Silicon Luxembourg magazine. Read the full digital version of the magazine on our website, here. You can also choose to receive a hard copy at the office or at home. Subscribe now.

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