Gibraltar Crypto Fund Formation

Gibraltar is a popular jurisdiction for the establishment of investment funds and their managers, offering robust fund legislation, favourable tax advantages, efficient regulation, the flexibility of a small jurisdiction, quality infrastructure and the security of high regulatory standards that meet international requirements.

Since Gibraltar’s distributed ledger technology (DLT) regulatory framework came into effect in January 2018, Gibraltar’s Experienced Investor Fund (EIF) has become a popular vehicle to establish crypto funds.

Experienced Investor Fund

An EIF is a regulated collective investment scheme exclusively for investment by experienced investors, which covers high net worth individuals, investment professionals and anyone who invests at least €100,000 – or €50,000 with professional advice.

EIFs are designed to invest in a wide range of traditional and alternative asset classes, most recently this has included cryptocurrency and digital assets. There are no restrictions in law as to the eligible asset classes for an EIF, and there are no diversification requirements within the relevant legislation.

One of the attractions of Gibraltar as a fund domicile is that no regulatory approval is required before an EIF can begin to raise capital and commence with its investment activities.

Uniquely to Gibraltar, an EIF can be launched based on a legal opinion that confirms that the EIF has met all legal and structural requirements for its operations, and provided that the fund’s documentation is submitted to the regulator within ten business days of launch.

The majority of EIFs make use of this preferred route, however, alternative or exotic fund structures and strategies are generally discussed with the Gibraltar Financial Services Commission (GFSC) ahead of launch.

EIFs require two local authorised EIF directors, an approved fund administrator and a local auditor. The fund will also require a bank account, crypto wallet(s) and an offering memorandum that meets the requirements of the EIF regulations.

EIFs are typically set up with ordinary shares and participation shares. Ordinary shares carry the voting rights with limited or no economic rights, whilst participation shares carry the economic rights with limited or no voting rights. The fund promoters and/or fund managers will own the ordinary shares, while the investors will be issued participation shares.

Protected Cell Companies

Crypto EIFs can also be set up as a Protected Cell Company (PCC). The PCC structure provides fund promoters with the ability to segregate a fund’s assets and liabilities between different subdivisions (cells). Each cell can serve as a sub-fund with separate investment strategies and investors. The PCC structure therefore allows multi-strategy managers to implement different strategies under the same umbrella. There is no limit to the number of cells a PCC may create.

The Gibraltar Funds and Investments Association (GFIA) recommends that all crypto funds dealing with third party money should be regulated as EIFs, however, a crypto private fund could be used in certain circumstances.

Sovereign will engage a local law firm of your choice to ensure that your fund is properly established.