Fintech 2026

IRELAND Law and Practice Contributed by: Niall Esler, Shane Martin, Laura Whitson and Coleen Wegmann, Walkers

published a Joint Report on recent developments in crypto-assets, including DeFi. 10.10 Regulation of Funds Irish regulated investment funds are authorised either as UCITS or as alternative investment funds (AIFs). The Central Bank has provided guidance on invest - ment in digital assets, which are generally considered to be assets that exist in digital form and that attach ownership rights that depend primarily on cryptogra - phy and distributed ledger or similar technology. This guidance recognises that the nature and character - istics of digital assets vary considerably, and distin - guishes, for example, between digital assets that are tokenised traditional assets and digital assets that are based on intangible or non-traditional underlying assets. For the purposes of its requirements, the Central Bank considers “digital assets” to be the latter type of digital asset. Its guidance states that the Central Bank is highly unlikely to approve a UCITS or an AIF marketed to retail investors proposing any exposure (either direct or indirect) to digital assets. In April 2023, the Central Bank increased the invest - ment limits for qualifying investors AIFs (QIAIFs) seek - ing exposure to the latter type of digital assets, as follows: • where a QIAIF is open-ended, it can gain exposure to digital assets of up to 20% of NAV; and • where a QIAIF is closed-ended or is open-ended with limited liquidity, it can gain exposure to digital assets of up to 50% of NAV. In order to avail of these limits, the alternative invest - ment fund manager must ensure the following require - ments are satisfied: • an effective risk management policy is implement - ed to address all risks relevant to investment in digital assets, at a minimum addressing risk relat - ing to liquidity, credit, market, custody, operational, exchange risk, money laundering, legal, reputa - tional and cyber-risk;

• appropriate stress testing on the proposed invest - ment in digital assets, reflecting the asset price volatility of digital assets, including the potential entire loss of value in the investment; • an effective liquidity management policy is in place, which includes a sufficient suite of tools to enable the AIF manager to manage liquidity events arising in the QIAIF; • the prospectus of the QIAIF must contain clear disclosure in relation to the nature of the proposed investment in digital assets and a clear articulation of the risks associated with that investment; and • the QIAIF should assess the overall construction of its portfolio to ensure that there is alignment between the redemption profile, the level of invest - ment in digital assets and the likelihood of illiquid - ity (in both normal and stressed conditions) in the types of digital assets invested in. Direct exposure by QIAIFs to digital assets continues to be prohibited by the Central Bank, pending satis - factory demonstration that the depositary safekeeping obligations can be complied with in accordance with the Alternative Investment Fund Managers Directive (Directive 2011/61/EU). The Central Bank provides for a pre-submission approval process in the event a QIAIF proposes to invest indirectly in digital assets in excess of the thresholds outlined above or to seek to make any direct investment in digital assets. In June 2025, ESMA’s technical advice to the Euro - pean Commission on the review of the UCITS Eligi - ble Assets Directive (2007/16/EC) highlighted that crypto-assets are not included in the list of eligible assets in the UCITS Directive and, therefore, legis - lative amendment to the UCITS Directive would be required to accommodate alternative asset classes. ESMA is of the view that any such expansion of the list of directly eligible asset classes would need to be carefully assessed in a separate workstream in the future and that any large-scale investments in alterna - tive assets such as crypto with their idiosyncratic risks would be better done under the AIFMD framework. Under ESMA’s proposals, any indirect exposure of a UCITS to ineligible assets such as crypto would be capped at an aggregate of 10% of its assets, provided all relevant requirements are met.

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