Institutional Adoption of Bitcoin in Europe Has Been Slow, with Regulatory Complexities and Conservative Investment Policies Acting as Major Hurdles

While the U.S. has made strides, including President Trump's executive order establishing a federal Bitcoin reserve, European companies have largely stayed quiet on the matter.

The pace of institutional Bitcoin adoption in Europe has been slower compared to the U.S., attributable to several factors.

According to Elisenda Fabrega, general counsel at Brickken, a European RWA tokenization platform, Europe's hesitation to adopt Bitcoin stems from unclear regulations, institutional signaling, and market maturity.

"We’re still in the early stages of crypto adoption, and European companies haven't yet taken a clear stance on Bitcoin as a reserve asset, which is something that would really accelerate the pace of adoption," Fabrega explained.

While the U.S. has seen more rapid integration, with President Trump's executive order establishing a federal Bitcoin reserve and companies like BlackRock making headlines with their Bitcoin investments, European companies have largely stayed quiet on the matter.

Some notable exceptions include BNP Paribas, which reported a $10 billion Bitcoin investment, 21Shares AG and VanEck Europe launching Bitcoin ETFs, and Bitpanda's survey findings that 40% of European investors are interested in crypto despite financial institutions' estimations of only 10%, showcasing a potential demand gap of 30%.

Moreover, Europe's fragmented regulatory framework poses another key issue. As analysts at Bitfinex highlighted, the European institutional landscape is divided, with several countries like France, Germany, and Italy having varying regulations and a preference for conservative investment mandates. This contrasts with the U.S., where the rollout of Bitcoin ETFs was supported by strong retail demand and a clear regulatory environment.

"We’ve seen a strong interest from U.S. retail investors in particular, which is interesting because usually in Europe, we’re more used to seeing strong interest in new financial instruments," added Iliya Kalchev, an analyst at Nexo, in an interview with BitRiver.

However, BlackRock's recent launch of a Bitcoin exchange-traded product (ETP) in Europe on March 25 could signal a change, potentially increasing institutional confidence in the asset.

Despite the growing interest in Bitcoin globally, regulatory uncertainty in Europe remains a major obstacle. A recent survey by Bitpanda suggested that European financial institutions might be underestimating the demand for crypto by as much as 30%.

As of writing, Bitcoin is priced at $82,079.66. While the U.S. has seen faster integration, with President Trump's executive order establishing a federal Bitcoin reserve and companies like Block (formerly Square) making headlines with their BTC investments, European companies have largely stayed mum on the matter.

According to Fabrega, this silence from European companies is a key factor in the slow pace of institutional adoption.

"We’re still in the early stages of crypto adoption, and European companies haven't yet taken a clear stance on Bitcoin as a reserve asset, which is something that would really accelerate the pace of adoption," she added.

According to Bitfinex analysts, European institutions are largely keeping their distance from Bitcoin, driven by several factors. They explained that several countries in the eurozone, including France, Germany, and Italy, have varying regulations and a preference for conservative investment mandates.

"The promise of high returns and the potential for capital preservation have failed to sway the majority of pension funds and asset managers to adjust their portfolios to include Bitcoin in any meaningful way," the analysts stated.

Furthermore, they noted that the bulk of U.S. institutional investors, like hedge funds and asset managers, are engaging in the bitcoin futures market on a net basis, while European institutions are largely absent from this arena as well.

In contrast, the rollout of Bitcoin ETFs in the U.S. was supported by strong retail demand and a clear regulatory environment, which ultimately led to the approval of the ProShares Bitcoin Strategy ETF in October 2021.

"We’ve seen a strong interest from U.S. retail investors in particular, which is interesting because usually in Europe, we’re more used to seeing strong interest in new financial instruments," Kalchev concluded.