Starting Your Own Cryptocurrency Fund
There are exciting opportunities to create a crypto-currency (CC) fund at present.
On one side, such funds provide a solution to the growing demand by investors seeking a prudent way to get a managed position in what is universally seen as the next big thing that everyone should be participating in.
On the other side, such funds can provide investment money to the growing number of new ventures with innovative new ways of taking blockchain technology and applying it to many types of commercial process — not only new processes for new paradigms and new products, but also updating and enhancing many existing methods of establishing, recording, validating, protecting and publishing transactions. As is being regularly demonstrated, the opportunity for enormous and fast returns on modest investments are excitingly present.
If you wish to establish your own crypto-currency or token focused fund, there are four primary issues to consider.
● Can you reach investors who would choose to participate in your fund
● Can you identify suitable investments for your fund
● How will you efficiently handle all the paperwork and management of the fund
● How will you comply with the steadily growing regulatory requirements of the fund’s operation
The first two business/marketing points are semi-self explanatory and are of course important issues for you to identify and resolve. But it is the other two points, also both inter-related, that are seldom fully appreciated and risk being overlooked until you may quite literally have reached the ‘penalty zone’.
Certainly, you need a professional advisor to help you negotiate your particular jurisdiction’s requirements and hurdles when setting up your fund. You also need to be aware of related requirements in the jurisdictions you may wish to be active in, and that can become a very costly exercise.
These initial requirements are just the start. The regulations and requirements for such funds and investments are growing almost as fast as the crypto-currencies themselves. Particularly if you plan to have a smaller sized fund, how can you avoid the need to create a multi-person compliance department with an associated cost that overwhelms your administrative budget?
We’re seeing an exciting development now of complete turn-key systems that manage the administrative and compliance requirements for such funds. In modern parlance, consider it ‘compliance as a service’ as well as ‘everything else administrative as a service’ too. When jurisdictions introduce new processes and documentation requirements, the third party service provider, monitoring all such developments, quickly updates their platform, saving you from involvement in any part of the process.
Our new Tokenbox service will offer all this for fund managers. It’s the result of our own experiences setting up The Token Fund, which we launched in March. The Token Fund was one of the more successful ICOs of recent months. We set it up to emulate, in the cryptocurrency universe, exchange-traded funds of the conventional investment marketplace. We’ve done well with the Fund — with a 380% rise in the portfolio’s performance — but what we realized was just how under-developed the infrastructure is for the development of these products. There need to be more ETF-type funds based on managers’ different specializations and knowledge. So we’ve set out to build the infrastructure to facilitate this and make it much easier for institutions and even individuals to become fund managers in the cryptocurrency world.
