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Malta and Gibraltar: Two options for the set up of Crypto Currency Funds

By June 6, 2024No Comments

In August 2018, Fexserv became the first in #Malta to secure license approval for a regulated Professional Investor Fund (PIF) for Qualifying Investors investing in digital assets on behalf of a client.

This achievement followed Malta’s introduction of specific regulatory requirements for PIFs investing in digital assets in February 2018, making the management of such strategies more possible and streamlined within a regulated framework. Since then, we have successfully onboarded numerous local and offshore funds investing in the same asset class. Notably, in 2022, we also assisted one of our PIF clients in transitioning to a fully regulated Alternative Investment Fund (AIF) focused on digital assets.

Additionally, earlier this year, we received approval from the #Gibraltar Financial Services Commission as an External Administrator, further enhancing our regulatory capabilities and service offerings.

Benefits of Setting Up a Digital Assets Fund in Malta

Malta offers a well-defined regulatory framework overseen by the Malta Financial Services Authority (MFSA), making it an attractive destination for setting up digital assets funds. Here’s a detailed guide to the process and the benefits:

Benefits:

  • Robust Regulatory Framework: Malta’s regulations are designed to provide clear guidance and oversight, ensuring investor protection and compliance.
  • EU Market Access: Funds established in Malta can leverage the EU passporting rights, allowing them to market their funds across all EU member states.
  • Flexibility: Malta offers various fund structures, catering to different investor needs and strategies.
  • Efficient Setup: Streamlined processes for certain fund types, such as NAIFs and NPIFs, enable quick market entry.
  • Experienced Ecosystem: Malta boasts a network of experienced service providers, including fund managers, administrators, and legal advisors.

Step-by-Step Guide:

  1. Choose the Fund Type: Professional Investor Funds (PIFs): Suitable for qualifying investors, offering flexibility in investment strategies and regulations, applicable if AUM is less than €100M. Alternative Investment Funds (AIFs): Can be marketed across the EU under the Alternative Investment Fund Managers Directive (AIFMD). Notified Alternative Investment Funds (NAIFs): Faster setup, operations can begin within 10 days of notification to the MFSA, similar to Luxembourg’s RAIFs. Notified Professional Investor Funds (NPIFs): Fast setup for PIFs, operations can start within 10 days of notification, applicable if AUM is less than € 100M.
  2. Establish the Legal Structure: Investment Company with Variable Share Capital (SICAV): Preferred for its flexibility and ability to create sub-funds. Limited Partnership: An evolving option as the MFSA revises regulations.
  3. Appoint Service Providers: Fund Manager: Can be based in Malta or elsewhere; regulatory status depends on the fund type. Both AIFs and PIFs can be self-managed. Depository/Safekeeping: Required for AIFs and NAIFs; PIFs and NPIFs need proper safekeeping without necessarily appointing a local depository. Administrator: Must be based in Malta for NAIFs and NPIFs; most AIFs and PIFs also use local administrators.
  4. Setup Process: Meeting with the MFSA: Initial meeting to discuss the fund’s objectives and structure. Offering Memorandum: Detailed document outlining the investment strategy, risks, and terms. Application Forms: Specific forms required by the MFSA, detailing the fund’s operational and compliance frameworks. Due Diligence: Fit and proper test for key personnel to meet MFSA standards. Regulatory Approval: Submission and approval process, with NAIFs typically having the quickest turnaround. Fund Launch: The fund can start receiving investor subscriptions.

Benefits of Setting Up a Digital Assets Fund in Gibraltar

Gibraltar provides a favorable regulatory environment for funds, overseen by the Gibraltar Financial Services Commission (GFSC). Below are the benefits and a detailed setup process:

Benefits:

  • Business-Friendly Environment: Gibraltar is known for its pro-business regulatory framework and favorable tax regime.
  • Strategic Location: Positioned as a gateway to both the European and global markets.
  • Speed and Efficiency: Streamlined processes for fund setup, particularly for EIFs.
  • Regulatory Support: The GFSC offers clear guidance and support throughout the fund establishment process.
  • Flexibility: Options for both regulated and unregulated fund structures cater to various investor needs.

Step-by-Step Guide:

  1. Choose the Fund Type: Experienced Investor Funds (EIFs): Regulated, suitable for experienced or high-net-worth investors, authorised by the GFSC. Private Funds: Unregulated, offering flexibility without the regulatory burden, though registered with the GFSC.
  2. Setup Process for an EIF: Finalise Prospectus: Draft the Private Placement Memorandum (PPM), detailing investment objectives, strategy, restrictions, and fee structure. Account Opening: Establish accounts with banks, custodians, brokers, and exchanges. Fund Launch: Directors hold a launch meeting, finalise details, and commence operations. GFSC Submission: Submit required documentation to the GFSC within 10 days of the launch, including the PPM, constitution documents, legal opinion, relevant registration form, and fee.

By choosing to set up a fund in Malta or Gibraltar, investors and fund managers can benefit from robust regulatory frameworks, efficient setup processes, and strategic market access, making these jurisdictions attractive for digital asset funds.

Reach out to us on queries@fexservfunds.com for any guidance or information you might require!