Gibraltar Crypto Funds

The Government of Gibraltar and the Gibraltar Financial Services Commission have recently reiterated their intention to make Gibraltar a prime jurisdiction for crypto business. Following the introduction of the new Distributed Ledger Technology Providers Regulations on 1 January 2018, the interest in Gibraltar has been over and above what anyone expected. This has been complemented by the support of Turicum Private Bank and Gibraltar International Bank, which quickly developed the relevant skillset and obtained necessary internal approvals to ensure they could provide banking services to crypto businesses and individuals involved in such businesses. In the coming months, it is expected that other Gibraltar banks will also start operating in this space.

The cryptocurrency craze has also seen the emergence of the crypto fund, as institutional investors and other "no-coiners" look to those with more experience and expertise to invest with. The demand is amplified due to the FOMO (Fear Of Missing Out) phenomenon, which has become something of a cliché within crypto circles. Crypto funds, however, need to be carefully structured in order to appropriately protect investors. Otherwise, they can easily be used as a means to defraud unknowing investors with little or no chance of recovering their money.

The Gibraltar Funds & Investments Association has therefore recommended that all crypto funds, dealing with third party money, should be regulated by the GFSC as Experienced Investor Funds. EIFs are restricted to persons that fall within the definition of "experienced investor", which covers high net worth individuals, investment professionals and anyone who invests at least €100,000 (or €50,000 with professional advice). In addition, GFIA will be issuing an addendum to its existing funds Code of Conduct to tackle the specific problems thrown up by crypto funds. Since crypto EIFs are set up under the existing EIF regulations, they do not require a DLT licence.

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 which meets the requirements of the EIF regulations. At Hassans, our crypto EIFs will also have tailored written policies covering storage, transmission and valuation of cryptos.

EIFs do not require pre-approval from the GFSC before launching. EIFs are launched based on a Gibraltar legal opinion, provided that...