What do I need to do to set up a “crypto fund” in Singapore?
Step 1: Incorporation of a Singapore Legal Entity
A popular fund structure would be the Variable Capital Company for the “crypto-focused fund”. The Legal Entity could be a Variable Capital Company, Unit Trust, Limited Partnership and Limited Liability Company.
Step 2: Obtain the relevant licences
Fund Management Licence
For an overview on fund management licences, entities engaged in fund management activities must hold either a Capital Market Services (CMS) licence for fund management as a Licensed Fund Management (LFMC) or a Venture Capital Fund Manager (VCFM), be registered as a Registered Fund Management Company (RFMC) or be expressly exempted from holding a CMS Licence, in the case of the Single Family Office (SFO).
The licence required would depend on the investor restrictions and quantum of assets under management which the fund intends to market and manage. Note that in Singapore, crypto funds are not authorised for sale to retail investors.
The entity should satisfy MAS that its shareholders, directors, representatives and employees, as well as the FMC itself, are fit and proper, in accordance with the Guidelines on Fit and Proper Criteria issued by MAS.
Payment Services Licence (if applicable)
If the crypto fund intends to operate a platform an exchange to offer crypto and digital token/fiat exchange related services, this may constitute as providing a "Digital Payment Token" service under the Payment Services Act. Hence, a Payment Institution License (PIL) is required and certain requirements must be met in order to apply for the PIL.
Financial Adviser Licence (if applicable)
Where the crypto fund manager offers financial advice in respect of digital tokens as an investment product, a financial adviser's licence must be obtained, unless exempted, under the Financial Advisers Act (Cap. 110).
Step 3: Prepare the fund documentation
To carry out the crypto fund's business activities, the rights and obligations of the relevant parties should be set out in writing. Such documents include but are not limited to subscription agreement, private placement/information memorandum, investment management agreement, administration agreement and custodian agreement.
Digital assets are intangible and stored in a digital format and include cryptocurrencies and crypto tokens. Crypto funds / Crypto asset management pertain to the monitoring and trading of crypto-assets on blockchain technology.