Original Authors: Zhang Qianwen, Cheng Chuying
Introduction
As crypto assets evolve from simple trading activities to professional asset management, an increasing number of Web3 project teams, quantitative teams, and high-net-worth individuals are adopting fund structures to manage crypto assets. In this process, the choice of a fund's legal structure is no longer a matter of formality; it is a fundamental decision directly impacting risk isolation, tax treatment, and long-term compliant operations.
From a regulatory practice perspective, differences in fund establishment systems, regulatory requirements, and tax arrangements across various jurisdictions determine the investment strategies and fundraising targets they are suited for. Whether it's multi-strategy quantitative trading, primary market investments, or family office asset allocation, there is no "optimal structure," only a "suitable structure" that matches the business model.
This article deconstructs six major global crypto fund structures, analyzing their core mechanisms and applicable scenarios to provide reference for managers' compliance planning.
Cayman SPC: The "Umbrella Company" Suitable for Multi-Strategy Operations
The SPC (Segregated Portfolio Company) is a corporate form in the Cayman Islands. Its key feature is the ability to establish multiple, legally independent investment portfolios (SPs) under a single legal entity.
- Core Mechanism: Risk Segregation
The assets and liabilities of each SP are legally separate. For example, if Strategy A loses money, its creditors can only claim against A's assets and cannot touch the funds of Strategy B. This is crucial in the highly volatile crypto market, effectively preventing one strategy's "meltdown" from dragging down the entire operation.
- Applicable Scenarios:
When a manager simultaneously runs both high-risk and low-risk strategies, an SPC ensures that accounts are kept separate and do not interfere with each other. Additionally, launching a new product simply involves creating a new sub-fund under the existing SPC, eliminating the need to register a new company. This offers low cost and high speed, making it suitable for teams looking to quickly incubate new strategies.
Cayman ELP: The "Partnership Structure" Suitable for Primary Market Investments
Unlike the corporate structure of an SPC, the ELP (Exempted Limited Partnership) is a partnership structure established under the Exempted Limited Partnership Law. It does not have independent legal personality but is a contractual relationship between a General Partner (GP) and Limited Partners (LPs). ELPs are widely used in venture capital (VC) and private equity (PE).
- Core Mechanism: Clear Division of Roles
The GP (General Partner) is responsible for managing the money and making investments, bearing unlimited liability (in practice, a limited company is often used as the GP to isolate risk). The LP (Limited Partner) provides capital, does not participate in management, and their liability is limited to their contribution.
- Applicable Scenarios:
Primary market investments involve complex profit distribution. The Partnership Agreement allows for flexible terms on how and when profits are shared. Furthermore, ELPs are tax-transparent, meaning the fund itself does not pay tax, and the list of LPs does not need to be publicly disclosed, balancing tax efficiency and privacy protection.
BVI Approved Fund: The "Entry-Level Compliance Solution" for Small Teams
For smaller, early-stage teams, the BVI (British Virgin Islands) Approved Fund offers a compliant option with low barriers to entry and controllable costs.
- Core Mechanism: Filing-Based, Simplified Regulation
Establishment is fast, typically approved within two to three days of submitting materials. It is not mandatory to hire an auditor or a local custodian, significantly reducing operational costs.
- Applicable Scenarios
Suitable for teams with assets under management below $10 million who are still in the strategy validation phase. It allows for establishing a compliant entity at a lower cost to build a track record. The investor cap is 20 persons, and the asset size cap is $100 million, making it suitable for fundraising within a familiar circle or community.
Singapore VCC: The "Onshore Fund Structure" Balancing Compliance and Practicality
The VCC (Variable Capital Company) is a fund vehicle introduced by Singapore that retains the flexibility of offshore funds while having the regulatory backing of the Monetary Authority of Singapore (MAS).
- Core Mechanism: Umbrella Structure + Tax Incentives
The VCC also supports the establishment of multiple sub-funds with asset segregation. Most importantly, it can apply for the 13O/13U tax exemption scheme, where qualifying investment income is tax-exempt, and dividends are not subject to withholding tax.
- Applicable Scenarios
Suitable for teams looking to set up an office in Singapore, obtain work visas, or establish a family office. It offers an internationally recognized compliant identity while protecting investor privacy (the shareholder register is not public), making it attractive to capital seeking long-term stability.
Hong Kong LPF: The "Cross-Border Fund Channel" Connecting Asian Markets
The LPF (Limited Partnership Fund) is a localized fund structure launched by Hong Kong, modeled on the Cayman ELP. It is registered and managed in Hong Kong and governed by Hong Kong law.
- Core Mechanism: Localized Limited Partnership
Structurally similar to the Cayman ELP, but all legal matters and bank communication are handled locally in Hong Kong, with no time zone or language barriers.
- Applicable Scenarios
If the team is primarily based in Asia, the LPF offers convenience in lawyer liaison, bank account opening, and daily maintenance. Coupled with Hong Kong's Unified Fund Exemption (UFE) regime, qualifying funds can enjoy profits tax exemption, offering a friendly tax environment.
Hong Kong OFC: The "Open-Ended Fund Structure" Suitable for Public Offerings or ETF Issuance
The OFC (Open-ended Fund Company) is a corporate-type open-ended fund with independent legal personality, allowing flexibility in handling investor subscriptions and redemptions.
- Core Mechanism: Variable Capital, Flexible Structure
An OFC can increase or decrease shares based on subscription and redemption demands, bypassing the restrictions of capital reduction in traditional companies. It can be used for private placements or apply for public offerings (requires SFC authorization).
- Applicable Scenarios:
To encourage OFC development, the Hong Kong government offers a subsidy covering up to 70% of the establishment costs (capped at HKD 1 million per company), effectively reducing startup costs. Additionally, the OFC is currently one of the mainstream structures in Hong Kong for issuing virtual asset ETFs and fundraising from the public, making it suitable for highly liquid trading strategies.
Overview of Core Characteristics of the Six Structures
Based on the above analysis, the legal characteristics and applicable scenarios of the six mainstream fund structures are summarized below:
Conclusion
In the field of crypto assets, the question regarding fund structures is never "whether to establish one," but rather "when to establish it and in what form." Different legal structures correspond not only to how taxes are paid and how regulations are applied but also to how risks are borne, how investors participate, and how the future operational model will succeed.
The fund structures introduced in this article are neither good nor bad in themselves; the key is whether they match your business model, investment strategy, and target investors. For managers who are already operating or plan to operate crypto assets in a fund format, thinking through and finalizing the structure early is itself an important form of risk control.
