A digital-asset fund manager (an investment manager whose portfolio consists wholly or primarily of crypto assets, tokens or digital-asset strategies) operates at the intersection of two regulatory regimes that rarely speak the same language: funds law and the emerging virtual asset service provider (VASP) framework. The wrong domicile locks in tax leakage, restricts which investors you can accept, and may require you to hold two separate licences where one would have sufficed. Getting the structure right before you launch is substantially cheaper than unwinding it afterward.
This guide sets out the principal steps to licensing a digital-asset fund manager from entity formation through to operational go-live. Each step identifies the regulated basis, the cross-border interaction and the mistake that most commonly causes delay.
Step 1: Determine Whether a Fund Manager Licence Is Required
Every jurisdiction that has a developed funds regime requires a manager, investment adviser or general partner to hold a regulated authorisation before it can manage third-party capital – the digital-asset nature of the portfolio does not remove that obligation. The question is not whether a licence is needed. It is which licence, in which jurisdiction, issued by which regulator, and whether a second authorisation is required for the VASP or crypto-asset service provider (CASP) activities layered on top of fund management.
The threshold test is straightforward: if you are making discretionary investment decisions over assets belonging to investors other than yourself, you are almost certainly carrying on a regulated activity. In the EU, that analysis runs under the AIFMD (Alternative Investment Fund Managers Directive) as well as, from the CASP layer, under MiCA (the Markets in Crypto-Assets Regulation administered by ESMA and national competent authorities). In Singapore, it runs under the MAS Securities and Futures Act as well as the Payment Services Act DPT framework. In the ADGM, it runs under FSRA authorisation for managing a collective investment scheme alongside the FSRA's virtual-asset regime. In our practice, the single most common early mistake is treating the VASP licence as a substitute for a funds-management authorisation – they address different activities and both may be necessary.
The cross-border dimension compounds the analysis. A manager domiciled in the Cayman Islands marketing to EU investors must satisfy both Cayman CIMA registration and EU national private-placement rules. A Malta-authorised AIFM passporting under AIFMD holds a single EU licence, but still requires CASP authorisation under MiCA for the digital-asset activities that sit alongside portfolio management.
Step 2: Choose the Fund Domicile and Vehicle
The fund domicile drives investor access, tax efficiency and the regulatory cost of the ongoing management licence – choosing it is the single most consequential structural decision the founders make. Four decision axes determine the right answer for most digital-asset funds: the target investor base, the asset mix (pure crypto vs. mixed with traditional instruments), the expected redemption profile and the fund's banking strategy.
The principal options in our cross-border practice break down as follows.
Cayman Islands: the CIMA-supervised structure remains the default for US-adjacent institutional capital and for hedge-fund style strategies. The Cayman Virtual Asset (Service Providers) Act overlays a VASP registration requirement on managers engaging in certain digital-asset activities, but the jurisdiction's familiarity with fund structures, the depth of its service-provider ecosystem, and access to US tax-transparent structuring make it a persistent first choice. The risk: Cayman does not give EU passporting access.
Ireland / Luxembourg (EU AIFMD): an AIFM authorised by the Central Bank of Ireland or the CSSF in Luxembourg holds an EU-wide marketing passport under AIFMD. For a fund targeting European institutional capital, this is a material advantage. Ireland in particular has developed regulatory guidance on crypto-asset funds. The CASP overlay under MiCA adds a separate layer of authorisation for the digital-asset service activities themselves. In our cross-border practice, operators building for the European institutional market consistently benefit from the passport more than they are burdened by the dual-authorisation cost.
BVI: the BVI Financial Services Commission supervises professional-only fund structures under the Securities and Investment Business Act, with a lighter regulatory footprint than the Cayman retail-fund framework. The VASP Act 2022 adds a VASP registration layer. BVI suits managers whose investor base is exclusively sophisticated and who do not need EU access.
ADGM (Abu Dhabi): the FSRA within the ADGM authorises investment managers and funds, and separately regulates virtual-asset activities. For a manager whose strategy involves Middle Eastern institutional capital or whose business is anchored in the UAE, the ADGM provides a credible, English-law governed domicile with strong investor-protection standards.
Singapore: MAS-licensed fund managers operating under the Payment Services Act's DPT framework serve the Asian institutional and family-office market. The licensing pathway is well-developed and the commercial infrastructure – prime broking, custody, banking – is robust for digital-asset managers.
Profile A: A manager targeting US and global institutional capital, running a liquid crypto strategy with monthly redemptions, will typically use a Cayman limited partnership or exempted company with CIMA registration. Profile B: A manager targeting European institutional pension capital will structure as an Irish or Luxembourg QIAIF or RAIF with AIFMD authorisation plus MiCA CASP authorisation, accepting the higher compliance overhead for the marketing passport. Profile C: A manager targeting family offices and UHNW in the Gulf and Asia may find the ADGM or Singapore structure better matches its investor base and banking relationships.
The common mistake at this step: selecting the domicile based on incorporation cost alone, without modelling the tax treatment for target investors. A Cayman fund may be efficient for the manager but create withholding-tax drag or FATCA/CRS complexity for EU pension investors. The domicile decision must be made in tandem with the tax analysis.
For a scoped assessment of your domicile and vehicle options, contact OBOLUS at info@oboluslaw.com. The process above describes the standard analytical path. Your facts – the entity, the investor base, the asset mix, the banking – change the analysis materially. Map your options.
Step 3: Identify the Required Licences and Authorisations
Once the domicile is fixed, the licensing map has three columns: the fund-manager authorisation, the fund-level registration or approval and, where applicable, the VASP or CASP authorisation for the digital-asset activities. Not all three will apply in every jurisdiction, but failing to check all three is a structural error that surfaces at first regulatory contact or first institutional due-diligence request.
In the EU, the AIFMD authorisation covers the manager; the fund registers as an AIF; and MiCA CASP authorisation covers the portfolio management of crypto-assets as a regulated crypto-asset service. In Singapore, the fund manager holds a Capital Markets Services licence (or relies on an exemption) from MAS; the fund itself registers as a restricted scheme or exempted scheme; and the manager holds a DPT service licence under the Payment Services Act if it is providing DPT services to the fund or to investors. In the Cayman Islands, the fund registers with CIMA as a registered or licensed fund; the manager registers as a registered person; and the VASP Act registration covers the digital-asset activities.
The cross-border note at this step is critical for managers that use sub-advisers or delegates. A Cayman-domiciled master fund using an EU-based investment adviser to make crypto-allocation decisions may pull the EU adviser into MiCA's CASP perimeter even if it does not directly hold or transfer assets. We advise clients to map the advice, execution and custody flows separately before committing to a delegation model.
The common mistake at this step: building the operating model assuming only one regulated entity is needed. Most institutional-grade digital-asset fund structures require at least two authorised entities – the manager or AIFM and a separately regulated custodian – and frequently three when the VASP or CASP layer is properly accounted for.
How Is Custody Arranged for a Digital-Asset Fund?
Custody of digital assets is a regulated activity in most flagship regimes, and institutional investors – particularly EU pension funds and insurance companies – will require an independently regulated, segregated custodian before they subscribe. The custody question cannot be deferred to post-launch.
Under AIFMD, the depositary function imposes specific obligations on the entity holding or verifying ownership of fund assets. For liquid crypto assets, the depositary must be a regulated credit institution, investment firm or other entity specifically approved for the role. ESMA has published guidance on the treatment of crypto assets held under depositary arrangements, and national competent authorities in Ireland and Luxembourg have developed specific expectations for crypto-AIF depositaries. The depositary cannot be the AIFM itself.
In the Cayman Islands and BVI, segregation obligations are less prescriptive but prime-broker or custodian arrangements at the fund-document level are expected by institutional investors. Exchange-held assets – positions held on a trading venue's omnibus account – generally do not satisfy institutional segregation expectations even where technically permissible under the fund documents.
The Travel Rule (the obligation under FATF Recommendation 15 to pass originator and beneficiary data with a virtual-asset transfer) applies to custodians in most FATF-member jurisdictions. A fund that moves assets between its custodian and a trading venue will trigger Travel Rule obligations on both counterparties. In our practice, we have seen subscription delays and blocked transfers where the fund's custodian and its appointed trading venues had not implemented compatible Travel Rule solutions before the fund launched. Solving the operational stack before launch, not after, is essential.
A recent engagement illustrates the point. In a matter handled in the past year, a digital-asset fund preparing for its first close had structured its custody across two venues without a depositary. The institutional anchor investor – a European family office with AIFMD-standard due-diligence requirements – withheld its commitment until a regulated depositary was in place. We coordinated the depositary appointment alongside the manager's MiCA CASP authorisation; the fund closed within the target window.
The common mistake at this step: treating custody as an operational matter rather than a legal one. The identity, regulatory status and geographic location of the custodian are structural facts that affect the fund's regulatory classification, its investor access and its AML/Travel Rule compliance posture.
Step 4: Build the AML/CFT and Compliance Framework
Every licensed fund manager is a regulated entity for AML/CFT purposes and must implement a written compliance programme that satisfies the requirements of its home regulator. For digital-asset managers, the programme must address the additional risks that crypto assets introduce: pseudonymous counterparties, on-chain transaction monitoring, wallet-address screening and the Travel Rule.
The FATF Recommendations set the international baseline. Most jurisdictions have transposed the virtual-asset provisions of Recommendation 15 into domestic law, requiring VASPs and CASPs to apply customer due diligence, transaction monitoring and suspicious-activity reporting to virtual-asset transfers. The compliance framework must be calibrated to the specific assets the fund trades: a fund holding stablecoins has different monitoring obligations than one trading in privacy coins or DeFi protocol tokens.
In our cross-border practice, managers operating under an EU AIFMD licence alongside a MiCA CASP authorisation must maintain compliance programmes that satisfy both sets of requirements, which address overlapping but not identical risk categories. The AML officer role – a named individual responsible for the programme – is a mandatory appointment in most flagship regimes, and regulators in Ireland, Malta and Singapore have become significantly more rigorous about testing the officer's experience and the programme's documented risk appetite.
The cross-border note: a manager registered in the Cayman Islands but marketing to EU investors must implement a compliance programme at least equivalent to EU standards to satisfy the AML due diligence of EU institutional investors, even if Cayman domestic law is technically less prescriptive. Institutional capital flows to managers whose compliance infrastructure meets the standard of the most demanding investors in the pool, not the minimum required by the manager's home regulator.
The common mistake at this step: purchasing an off-the-shelf AML policy template and representing it as the firm's programme. Regulators and institutional investors both conduct gap analyses against the firm's actual activities; a generic programme that does not address the specific assets, investor types and technology stack of the manager is a red flag in a regulatory examination and a due-diligence failure point.
If a prior application stalled or an account was closed, a second read of the compliance structure can surface the structural cause and the route back. Write to info@oboluslaw.com or map your options.
Step 5: Document the Fund and the Manager
Fund documentation for a digital-asset manager carries a higher disclosure burden than a comparable traditional-asset fund, because the risks are materially different and regulators as well as investors expect them to be described specifically. Generic risk factors copied from a liquid-equity fund are not adequate and expose the manager to misselling or disclosure claims.
The core documents are the limited-partnership agreement or constitutional document of the fund vehicle, the private placement memorandum or offering document, the investment management agreement, the subscription documents and – where MiCA applies – the crypto-asset whitepaper (the disclosure document required under MiCA for certain token offerings and services). For an AIFMD-supervised fund, the AIFM must also maintain an annual report and detailed investor disclosures covering leverage, liquidity management and risk.
The offering document must address: the specific digital assets in scope, including the basis on which they are classified (security, utility, ART, EMT or "other" crypto asset under MiCA); the custody and safekeeping model; the liquidity and redemption mechanics, which in a digital-asset fund require specific attention to on-chain settlement timescales and exchange liquidity; the valuation methodology; the use of smart contracts or automated execution tools; and the conflicts of interest arising from the manager's own trading, token holdings and affiliated relationships.
The cross-border note: a fund that accepts US persons must comply with US securities-law offering requirements, and the standard Regulation D or Regulation S carve-outs require specific structuring in the subscription documents. An EU-domiciled fund accepting non-EU investors must consider whether national private-placement rules in those investors' home jurisdictions require registration or notification. In our practice, the failure to route the offering document through a jurisdiction-by-jurisdiction review before the first marketing contact is a recurring source of post-launch remediation work.
The common mistake at this step: recycling documentation from a prior non-digital-asset fund or from a template not adapted to the manager's specific strategy and target jurisdictions. Digital-asset risk factors, custody mechanics and token-classification analysis are not interchangeable between funds, and regulators examining the documents will identify gaps.
Step 6: Establish Banking and Operational Infrastructure
Banking access for a digital-asset fund remains the most practically constrained element of the launch process – more so than licensing in most cases. A fund that has completed its regulatory authorisation but cannot open a fiat account cannot operate. Institutional investors will not subscribe to a fund without a verified banking relationship, and administrators cannot process subscriptions without one.
The banking analysis must run in parallel with the licensing process, not after it. The key variables a bank assesses when onboarding a digital-asset fund are the fund's domicile and regulatory status, the identity and regulatory status of the custodian, the nature of the assets (stablecoins, major liquid tokens or more exotic instruments), the investor base and its source-of-wealth profile, and the manager's AML programme documentation. In our cross-border practice, managers with a fully licensed structure, a regulated custodian and a detailed AML programme have materially better outcomes in bank onboarding than those who approach banking as an afterthought.
For digital-asset funds, the banking stack typically has three layers: a fiat banking account for subscription and redemption proceeds; a stablecoin settlement layer for assets that move on-chain without converting to fiat; and the custody and execution layer managed through the regulated custodian and appointed trading venues. Each layer has its own regulatory and counterparty-risk profile, and each layer must be documented in the fund's offering materials and risk disclosures.
The cross-border note: a Cayman-domiciled fund managed by an EU-based AIFM will face banking enquiries in both jurisdictions. The Cayman account and the EU management entity's account may be subject to different AML screening standards, and inconsistencies between the two profiles are a common cause of account delays. Aligning the compliance documentation across both entities before submitting bank-opening applications is the single most effective way to reduce banking friction.
The common mistake at this step: approaching banks without a completed regulatory authorisation and a documented AML programme. Banks conducting enhanced due diligence on a digital-asset fund will request the licence, the offering document, the custodian details and the AML policy. Arriving without these documents adds weeks to the onboarding timeline and signals operational immaturity to a compliance team that is already cautious about the sector.
What Are the Ongoing Compliance Obligations for a Licensed Crypto Fund Manager?
Licensing is the beginning of the regulatory relationship, not the end. A licensed digital-asset fund manager carries ongoing obligations to its regulator, its investors and – through the Travel Rule and AML regime – to the financial system as a whole. The operational compliance posture at launch must be sustainable throughout the fund's life.
Core ongoing obligations include: annual regulatory reporting to the home regulator (including AUM reporting, leverage disclosure and investor notifications under AIFMD); annual financial statements prepared to the applicable standard and audited by a qualified auditor with crypto-asset experience; quarterly or annual investor reports covering performance, risk, NAV and any material changes to the investment strategy or custody arrangements; AML programme reviews and suspicious-activity reporting to the financial intelligence unit in the manager's home jurisdiction; and, for MiCA-supervised managers, periodic reporting to the relevant national competent authority under ESMA's CASP supervisory framework.
Travel Rule compliance is an ongoing operational obligation, not a one-time implementation. Every transfer of digital assets by or on behalf of the fund is subject to the FATF Recommendation 15 data-passing obligation in jurisdictions that have transposed it. As more jurisdictions complete transposition, the number of transfers that trigger the obligation will increase even if the fund's operations do not change.
In our cross-border practice, we advise licensed fund managers to conduct an annual compliance review that addresses three questions: have the applicable regulatory requirements changed since the last review; do the fund's actual operations still match the activities described in its regulatory authorisation; and has the custody and banking infrastructure been stress-tested against the current counterparty-risk environment? A fund whose operations have drifted from its licensed scope is the most common source of regulatory examination findings in the digital-asset sector.
The common mistake at this step: treating the compliance calendar as a back-office function. In a regulated digital-asset fund, the compliance calendar – reporting deadlines, AML programme reviews, Travel Rule audits, licence renewals – is a board-level responsibility. Missed deadlines or material omissions in regulatory reports have consequences that range from formal censure to licence suspension in the leading hubs.
Related at OBOLUS
- Funds and Investment Vehicles for Digital-Asset Businesses – our full practice overview covering fund structures, licences and cross-border considerations
- Crypto Fund Formation in Ireland – how to structure an EU-passported digital-asset fund using an Irish AIF
- Stablecoin Freeze Requests: Practical Lessons for Boards – what fund managers need to know about on-chain recovery when assets are misappropriated
FAQ
Where should a crypto fund be domiciled?
The right domicile depends on four variables: the target investor base, the asset mix, the redemption profile and the banking strategy. Cayman suits US-adjacent institutional capital with flexible structural conventions. An EU AIFMD structure in Ireland or Luxembourg delivers a marketing passport across the EU/EEA. BVI suits professional-only, non-EU capital with a lighter regulatory footprint. Singapore and the ADGM serve Asian and Gulf institutional investors respectively. Selecting a domicile without modelling the tax and investor-access implications is the most common structural error.
Does a digital-asset fund manager need a licence?
Yes, in every major jurisdiction. Managing third-party capital on a discretionary basis is a regulated activity whether the portfolio holds equities, bonds or crypto assets. In the EU, AIFMD authorisation is required and MiCA CASP authorisation separately covers the crypto-asset service activities. In Singapore, a Capital Markets Services licence and a Payment Services Act DPT licence may both be required. In the Cayman Islands, CIMA registration covers both the manager and the fund, with a VASP Act layer for digital-asset activities.
How is custody arranged for a crypto fund?
Custody of digital assets is a regulated activity in most flagship regimes and cannot be self-provided by the fund manager. Under AIFMD, a regulated depositary must be appointed and cannot be the same entity as the AIFM. Institutional investors generally require segregated, independently regulated custody as a condition of subscription. Positions held on exchange omnibus accounts do not typically satisfy institutional segregation standards. The custodian's regulatory status and geographic location also affect the fund's Travel Rule compliance posture, which must be addressed before the fund begins trading.
OBOLUS is an independent digital-asset law boutique acting only for businesses. We advise exchanges, custodians, token issuers and funds on licensing across 70+ jurisdictions, on disputes and on-chain asset recovery across 25+ forums, and on the tax, banking and compliance that sit around them. We match fund domicile to investor base, asset mix and redemption profile – because the wrong structure locks in tax leakage and limits which investors a manager can accept from day one. Digital assets are the whole of our practice. To discuss your situation, contact info@oboluslaw.com.
By Lydia Brennan, Tax & Structuring Analyst – specialist in cross-border fund structuring, domicile selection and tax analysis for digital-asset investment vehicles across multiple jurisdictions.
This publication is general information about the law and does not constitute legal advice. It is not a substitute for advice tailored to your circumstances. OBOLUS accepts no liability for action taken or not taken on the basis of this material. For advice on your situation, contact info@oboluslaw.com.