Crypto funds

CRYPTO FUND IN LITHUANIA

Lithuania has an attractive tax and legal regulation for the registration of crypto-oriented investment funds.

Crypto funds’ activities are supervised by the Central Bank of Lithuania.
Investors’ protection and reliability from investors’ perspective.
Partnership opportunities. It is easier to build partnerships with banks and other third parties as crypto funds’ activities are audited and supervised.
The possibility to structure the level volume of investors’ inclusion into daily operations of the crypto fund (i.e., structuring of individualized redemption procedure, rules on return payment, issuing different classes of units, etc.)
A crypto fund may have different crypto-oriented investment strategies, i.e., active crypto trading-related strategies (stablecoins BTC, ETH, NFTs, etc.) or passive VC-type strategies (i.e., investments oriented to equity of subjects that engage in crypto blockchain or related activities.)
A novel form of investment, attractive to crypto market enthusiasts and traditional investors.
Favourable tax incentives are applicable for collective investment vehicles (e.g., funds’ profits are fully exempt from corporate income tax, and fund management services are not subject to VAT.)

Intended for professional investors, if the strategy is oriented to active direct crypto trading-related activities (i.e., direct investments to BTC, ETH, etc.) If investments are oriented to the equity of blockchain-related start-ups, then such funds could be intended for well-informed investors (minimum investment amount—125 000 EUR.)
Possible closed-end or opened-end structures.
Managed by the Management Company, supervised by the Central Bank of Lithuania.
Minimum number of investors – 2, which shall not be related to the management company.
Agreement with the custodian to ensure the separation of assets.
Agreement with an audit service provider.
A separate policy on crypto asset valuation.

There are two options to structure a crypto fund in Lithuania:

Option 1. Setup of an asset management company and a crypto fund

Direct management, which can be performed directly through own management company
Longer duration of the establishment of both crypto fund management company and crypto fund. However, possibility to build the investment activities strategy based on individual goals.
Shareholders, as well as the members of management bodies of the management company shall comply with the regulatory requirements (reputation, experience requirements, etc., and must be approved by the Bank of Lithuania.)

Asset management company setup

Preparation of all documents required for the setup and authorization of the management company
Capital requirement varies between EUR 2 500-25 000 or EUR 125 000 (depending on the chosen legal form)
Monthly regulatory compliance support (preparation adjustments of internal policies, procedures, AML & KYC support, assistance in managing relationships with investors and state authorities, and ongoing tax and legal consultations)
Additional third-party fees are applicable (license fee, audit fee, etc.)

Crypto fund setup

Preparation of all documents required for the setup and authorization of the crypto fund (prospectus, PID, Crypto Assets Valuation Policy, etc.)
Monthly regulatory compliance support (preparation and adjustments of internal policies, investment agreements, procedures, AML & KYC support, assistance in managing relationships with investors and state authorities, and ongoing tax and legal consultations)
Additional third-party fees are applicable (authorization fee, audit fee, etc.)

Option 2. Setup of a crypto fund managed by an external asset management company

Crypto fund management is delegated to a professional external fund manager management company.
A quick and straightforward procedure of the crypto fund incorporation. The crypto fund parameters may need to be adjusted to the internal rules of the management company.
No additional personnel for management purposes is required.

Process of a crypto fund setup

Preparation of all documents required for the setup and authorization of the crypto fund (prospectus, PID, Crypto Assets Valuation Policy, etc.)
Monthly regulatory compliance support (preparation and adjustments of internal policies, investment agreements, procedures, AML & KYC support, assistance in managing relationships with investors and state authorities, and ongoing tax and legal consultations)
Additional third-party fees are applicable (authorization fee, audit fee, etc.)

External asset management company-related fees

Annual management fee is applicable. Fees may vary depending on the chosen management company.