Obtaining a license for a crypto fund

The cryptocurrency business is experiencing a peak period of popularity. Over the past few years, digital currencies such as Bitcoin have increased their value significantly, bringing many new players to the market. Investors are realizing the potential of cryptocurrencies as a tool for obtaining high returns and diversifying their investments. Professional cryptocurrency management can be an effective option for investors. One of the methods of such management is the creation of crypto funds.
A crypto fund is an investment vehicle that allows you to invest in a specially selected portfolio of cryptocurrencies. Such a fund is managed by a qualified team of professional traders who perform market analysis and make informed decisions regarding the purchase or sale of digital assets in order to obtain the greatest profit.
Investors who invest in international cryptocurrency funds acquire a share in the fund's portfolio, and the income or loss from their investments is distributed among them proportionally. Cryptocurrency funds provide an opportunity to diversify an investment portfolio, participate in the development of the digital currency market, and receive passive income from investments in this area. A cryptocurrency fund can be structured in a variety of ways.

Types of crypto investment fund

It can be a closed-end or open-end crypto investment fund, available through an exchange or offered exclusively to certain investors. Cryptocurrency funds can employ a variety of investment strategies, such as passive buy-and-hold investing, active portfolio management, and hybrid approaches.
When creating a crypto fund, it is important to take into account regulatory requirements, ensure the protection of assets and investor data, and attract the attention of potential investors. There are specialized organizations that can help create and manage a crypto fund, as well as comply with relevant rules and international standards.

Benefits of Obtaining a Crypto Fund License

Registering a crypto fund offers several advantages:

Diversity of fund types. Fund structures provide investors with different ways to purchase and manage assets, allowing them to choose the most appropriate option for their goals. This helps to better match the needs and goals of both investors and the management company.
Investor protection. Registering a crypto fund creates trust among investors, as it requires compliance with certain rules that the fund must follow. This may include compliance with anti-money laundering (AML) and combating terrorism financing (CFT) requirements, as well as other regulatory measures aimed at preventing fraud and illegal activity. It helps protect investors by providing information about the fund’s status, asset management methods, and investment selection procedures.
Legal transparency. The creation of a cryptocurrency fund involves legal procedures and checks, which ensure the transparency of the fund's activities. Investors receive information about the fund, its strategy, the management company, and the risks associated with investments.
Access to certain markets. Registering a crypto fund may provide access to certain markets that may not be available to unregistered funds or unqualified investors. For example, institutional investors may be restricted from investing in unregulated funds, while registration may provide such access.
Attracting institutional investors. Establishing a fund may be attractive to institutional investors who prefer to invest in regulated products. This may result in attracting more investment and expanding the pool of potential investors.
Potentially Lower Costs to Set Up a Business. There are costs associated with setting up a crypto fund abroad, but they may be lower than setting up a traditional fund. This may be due to a more flexible structure and regulatory requirements, which may reduce some barriers to entry for management companies.
Possibility to independently set the minimum investment amount. Fund registration enables the management company to independently set minimum investment amount requirements. This allows for more effective control over the composition of the investor base.

Choice of jurisdiction for Crypto fundation

Before registering a crypto fund, it is important to choose a suitable jurisdiction where the legislation is favourable for working with digital assets. Popular options include such areas as:

Singapore - Regulated by the Monetary Authority (MAS), requires a license under the PSA
Switzerland – FINMA issues licenses for crypto funds, especially in the “Crypto Valley” (Zug).
Malta – VFA license (Virtual Financial Assets Act).
Estonia – Virtual Asset Service Provider (CASP) license.
UAE ( Dubai ) – regulation by VARA (Virtual Assets Regulatory Authority).
Cayman Islands – CIMA Investment Fund License.
El Salvador - Digital Asset Management License (Licencia para la Gestión de Activos Digitales).
Each jurisdiction has its capital, reporting and compliance requirements. We will help you choose the best jurisdiction based on your needs.

Determining the structure of the fund

A crypto fund can be organized in various forms:

Hedge fund - for qualified investors.
ETF or index fund – for a wide range of investors.
Venture fund – investments in startups and ICO.
Most often, crypto funds are registered as:
LLC (for small funds).
Limited Partnership (LP).
Investment fund (e.g. in the Caymans).

Licensing requirements for crypto fund

Basic requirements for obtaining a license:

Legal registration. It is necessary to register the company in the jurisdiction you have chosen. Appoint directors and beneficiaries, and approve the Articles of Association.
Financial requirements. Minimum authorized capital (for example, in Singapore - from 50,000 SGD, in Switzerland - from 100,000 CHF). Each jurisdiction has its requirements here.
Compliance and AML / KYC. Implementation of AML (Anti-Money Laundering) and KYC (Know Your Customer) policies. Appointment of a compliance officer (MLRO).
Business plan and audit. It is necessary to provide a detailed business plan to the regulator and undergo a mandatory audit of financial statements.
Security and storage of assets.

The process of obtaining a license for fund

Again, it all depends on the jurisdiction, but there are general points that await every entrepreneur who plans to obtain this license. These are:

Preparation of documents

(charter, business plan, AML policy)
Applying the regulator

(e.g. FINMA, MAS, VARA)
Regulatory review

(3-12 months)
4.Paying fees and obtaining a license
5.Launch of the fund and start of work

Before launching a crypto fund, it is recommended to consult with lawyers and financial experts specializing in blockchain regulation. Fortunately, you have experienced specialists at Law & Trust International. We are ready to help you at any stage!