Since Gibraltar’s DLT Regulatory Framework came into effect on 1st January 2018, the Government of Gibraltar and the Gibraltar Financial Services Commission (GFSC) have worked to transform Gibraltar into an international centre of excellence for business working with DLT and in the cryptospace. It was therefore a logical step in the evolutionary process of Gibraltar’s financial services ecosystem for the crypto fund to emerge, allowing institutional investors and others to invest in digital assets with those with greater levels of experience and expertise.
The maturity of Gibraltar’s DLT ecosystem has natural synergies with the jurisdiction’s firmly established funds regime and this is proving to be powerfully attractive to fund promoters.
As with any new asset class, there are regulatory risks that exist with crypto funds and therefore these must be carefully structured to protect investors appropriately. For this reason, the Gibraltar Funds and Investments Association (GFIA) has recommended that all crypto funds dealing with third party money should be regulated as Experienced Investor Funds by the GFSC.
It will be essential for the crypto EIF to clearly state the valuation methodology for its crypto assets. This may be achieved by using the price given by the exchange with the largest volume for a specific coin or token at a specific time and day, and this must be clearly described in the fund’s offering memorandum.
As an EIF, the crypt fund may be managed by a third party investment manager or self-managed by its board of directors.
Crypto EIFs can also be set up as protected cell companies (PCCs). Fund promoters can create sub-funds, or separate cells where the assets and liabilities are statutorily segregated from each other. There is no limit to the amount of cells that a PCC may have.
The GFSC has highlighted numerous crypto-related issues that should be considered by a find promoter in their statement of 17 October 2018. View this statement here.