Structure and Administration of Cryptocurrency & Blockchain Technology Funds
Stonegate Global is uniquely positioned to offer industry-leading fund formation and fund administration solutions, providing unique cross-jurisdictional expertise for domestic and offshore cryptocurrency funds. Stonegate Global’s product suite is designed to meet the unique challenges of this emerging asset class.
Although numerous cryptocurrency hedge funds have launched over the past couple of years, there still remains many questions regarding best practices related to fund structuring, fund accounting and administration, as well as compliance and taxation of this emerging asset class. Unlike traditional alternative asset funds that have well-established industry accounting and compliance practices with streamlined and efficient monthly reporting processes, emerging cryptocurrency funds are evolving with respect to fund governance and industry-best practices.
Prime Brokerage, Crypto Exchanges & Reporting
Central to these challenges is the rapidly growing number of exchanges and execution platforms that lack traditional prime brokerage and consolidated reporting. Unlike the traditional prime brokerage model that bundles services including custody, consolidated counter-party reporting, trade execution, technology, margin lending, and risk management services, crypto-asset funds lack a centralized platform for these services. Fund administration firms rely heavily on this data to provide its suite of services. Without such a solution, fund administration requires the import of data from disparate sources, numerous exchanges, etc. Fortunately, it appears as a couple of major industry players are rapidly approaching the deployment of a prime brokerage solution for the cryptocurrency asset class.
Fund Administration & Valuation
Other important considerations in administering crypto-asset funds includes valuation. In a traditional alternative asset fund, valuation is typically measured in the investors’ native currency (i.e. USD, EURO, GBT, JPY etc.). However with cryptocurrencies, valuation can be based on factors that include both native currency and cryptocurrency values. Choosing the correct valuation methodology is an important factor in the administration of digital asset funds.
Fund Structuring & Regulatory Compliance
Finally, one of the most important factors is being current and knowledgeable of the evolving regulatory environment involving cryptocurrencies. Inevitably, governmental agencies, security regulators, and central banks will continue to regulate the exchange and distribution of cryptocurrencies, and this facet of the industry will continue to evolve. Understanding how these regulatory changes will affect formation, structuring and administration of cryptocurrency funds is essential to Stonegate Global’s core mission as we strive to stay ahead of fund governance issues and industry best-practices related to cryptocurrency hedge funds and blockchain technology private equity funds. Stonegate Global establishes cryptocurrency and other digital asset funds in numerous cross-border structures, including the US, Cayman Islands, Ireland, UK, Luxembourg and various other jurisdictions.