METAVERSE FUNDS MAY FACE MARKET REGULATOR HURDLE

MUMBAI: Three new proposals by Indian asset managers to launch so-called ‘metaverse funds’, focusing on investments in metaverse, blockchain and internet of things (IOT) technology themes, may face regulatory hurdles.

“If any fund has an underlying which is not recognized as a security under the Sebi Act, the regulator will not clear it. Since the funds will be open for retail investors, Sebi cannot allow investments into unregulated assets/underlying,” said a person directly aware of the regulator’s thinking.

A similar proposal last year to invest in crypto had to be withdrawn. Invesco Mutual Fund had proposed to launch Invesco Coinshares Global Blockchain ETF Fund of Fund. The new fund offer was later withdrawn, considering that India’s rules on crypto investments were still evolving. Invesco had then said such a launch would be premature. In December, Sebi’s top brass advised mutual funds against any fund offerings on crypto since the regulatory framework was still evolving.

“While it’s good that such new products in mutual funds are coming to the market for investors, it will boil down to how Sebi perceives it. We will not be surprised if these offerings go down the Invesco route. There is also the possibility that the regulator may delay giving its observations. Sebi will also scrutinize what will be real underlying in such a case. We will have to see how Sebi reacts to this or if the regulator comes up with new guidelines for fund houses,” said a partner at a leading law firm.