Registration of a crypto fund

Cryptocurrency is an affordable asset for all holders, and more and more digital currency holders are wondering how to increase their capital. Learning the rapidly evolving crypto market, as well as the basic principles of trading operations, takes time.

Crypto funds provide investors with the services of financial specialists who can predict the state of a rapidly changing market, wisely invest in cryptocurrency assets and reap the benefits.

In essence, crypto funds are analogues of classic investment funds that work directly with assets in the form of cryptocurrencies in order to benefit in the form of capital gains.

Depending on the chosen jurisdiction and the form of the company, the list of documents for obtaining a crypto fund license may vary.

Below is the minimum list of documents that will be required when establishing a fund for any jurisdiction.

• ✔ Memorandum

The memorandum contains basic information about the fund, which includes the structure of the fund, location, investment objectives and policies, investment restrictions, fees and risks.

• ✔ Regulatory documents

The list of regulatory documents of the fund will differ depending on the choice of the legal form of the company. It can be both a charter and a partnership agreement.

• ✔ Management agreement

If a third party is appointed as the fund manager, then it becomes necessary to sign an agreement on the management of the fund. Such an agreement contains the powers and responsibilities of the managing manager.

• ✔ Investment management agreement

This agreement contains obligations, liability, remuneration and other terms of cooperation between the fund and the investment manager, and also regulates the relationship between the owner of the fund, the managing manager and the investment manager.

Also, the list of documents that may be needed when creating a crypto fund includes:

• ✔ Investment advisory agreement – concluded between the investment manager and the investment advisor, contains the obligations of the investment advisor, his remuneration, as well as circumstances that may lead to termination of cooperation.

• ✔ The Administration Agreement contains the terms and conditions for the provision of services by the administrator.

• ✔ The subscription agreement is concluded between the fund and investors, which confirm that they are familiar with the risks of investing, agree to comply with the terms of the fund and provide key information about themselves.

• ✔ The depository agreement describes the conditions for the provision of services by the depository.

• ✔ The custodial agreement describes the conditions for the provision of services by the custodian.

Malta. Following the changes made in 2018 to Maltese law, cryptocurrency investment funds are regulated but attractive for the establishment of collective investment schemes (CIS), which do not fall into the category of AIF in accordance with AIF Directive 2014/65/EU. The Investment Services Act (ISA), with subsequent additions, establishes the main regulatory framework. To operate in Malta, a crypto fund must obtain an appropriate license from the MFSA.

Great Britain. The UK is one of the most respectable jurisdictions among investors whose activities are related to cryptocurrency. The legal framework of the UK provides a wide range of organizational and legal forms of crypto funds. Also, under certain circumstances, the fund’s profits may be exempt from corporate taxation.

Switzerland. Another of the most popular jurisdictions for registering a cryptocurrency-related business. When considering applications for the establishment of crypto funds, FINMA is guided by the provisions of the Financial Services Act (FinSA) and the Financial Institutions Act (FinIA). In order to avoid the risks that are directly associated with crypto assets, FINMA obliges investment managers to strictly comply with legal requirements. Another requirement of FINMA is that investments must be made through platforms hosted in a member country of the FATF Group.

In September 2021, the Financial Markets Supervisory Authority (FINMA) approved the first crypto fund.

Cayman islands. The advantages when creating cryptocurrency funds in the Cayman Islands are the stability of the country in the political sphere, the speed and simplicity in registering a company, the absence of legal requirements for the residence of the founders and employees of the funds, as well as the absence of taxation for funds. Almost ¾ of the world’s hedge funds are registered in the Cayman Islands.