Digital asset funds

What is a digital asset fund?

A digital asset fund is a collective investment structure that invests in, trades, holds or obtains exposure to virtual assets or other digital assets.

A fund may obtain exposure directly by holding virtual assets, or indirectly through other funds, securities, derivatives or businesses connected with digital assets.

A conventional fund interest may also be represented by a token. In that case, the applicable Jersey funds framework continues to apply in addition to the tokenised real-world assets guidance.

Is this the right pathway for you?

Choose this pathway if you are:

• establishing a Jersey fund that will invest in virtual assets or digital asset businesses
• establishing a Jersey-managed fund with a digital asset strategy
• providing Jersey fund services to a digital asset fund
• tokenising units or interests in a fund
• using virtual assets for subscriptions, redemptions or distributions
• proposing for a fund to use decentralised finance protocols as part of its investment or treasury strategy

If the business will also provide exchange, transfer or custody services to third parties, it should consider whether VASP registration is required.

Which regulatory requirements may apply?

Digital asset funds are considered under Jersey’s existing funds framework. The applicable route will depend on the legal structure, offering, investors, investment strategy, management arrangements and services provided.

The use of blockchain or virtual assets does not replace the ordinary regulatory analysis. Fund promoters and service providers must also consider whether any connected activity requires VASP registration, investment business, fund services business or another permission.

Where units or interests in a fund are tokenised, the JFSC’s tokenised real-world assets guidance applies alongside the relevant funds requirements.

Where a fund intends to engage with decentralised finance, additional engagement with the JFSC may be required. The fund and its service providers may also be subject to additional monitoring or reporting requirements, reflecting the nature and risks of the proposed DeFi activity.

What will you need?

The application should clearly explain:

1. The proposed fund product and regulatory route
2. The fund structure, promoter, manager and Jersey service providers
3. The investment objective, strategy and proposed digital asset exposure
4. Eligible investors, distribution strategy and investment restrictions
5. Valuation, pricing and liquidity arrangements
6. Custody of assets, private-key management and wallet controls
7. The selection and oversight of exchanges, custodians and other counterparties
8. AML/CFT/CPF, sanctions and source-of-funds arrangements
9. Market, liquidity, custody, technology, cyber and operational risks
10. Governance, conflicts, delegation and outsourcing
11. subscriptions, redemptions and the treatment of forks, airdrops and similar events
12. The disclosures and risk warnings to be included in the offering document

Where fund interests will be tokenised, the application should also explain the relationship between the token and the legal fund interest, how legal ownership is created and recorded, which register constitutes the legal ownership record, how token transfers are reflected in it, transfer restrictions, token-holder rights and the treatment of lost keys or compromised wallets.

Where the fund proposes to use DeFi, the application should identify the proposed activity and explain how the fund and its service providers will assess, approve, monitor and control the associated risks.

Application process

The first step is to identify the Jersey fund product and regulatory route that may be appropriate for your proposal. This will depend on the fund’s structure, the number and type of investors, how the fund will be offered and whether the fund or any of its service providers requires a regulatory certificate, registration or consent.

The applicant should appoint the Jersey service providers required for the selected fund route. Many applicants find it useful to engage a Jersey law firm or other appropriately experienced local adviser to help determine the appropriate route and prepare the application.

Applications are submitted to the JFSC using the application form or online process applicable to the chosen fund product. Depending on the route, this may involve:

• an application for the fund itself
• an application or notification concerning the fund’s Jersey service providers
• a consent under the Control of Borrowing (Jersey) Order 1958, commonly referred to as a COBO consent
• an alternative investment fund notification or application
• supporting information concerning the promoter, governing body, investment manager and other principal persons
• the draft offering document and constitutional documents
• additional information on the fund’s digital asset activities and related controls

The myJFSC portal can be used for a number of fund-related applications and notifications, including Jersey private fund, Jersey unit trust and certain non-domiciled structure applications.

Digital asset features should be clearly identified within the main fund application rather than treated as an addendum to an otherwise conventional submission. Early engagement is encouraged where the proposal involves novel custody or wallet arrangements, tokenised fund interests, DeFi, retail distribution, direct virtual asset subscriptions or redemptions, or complex valuation or liquidity arrangements.

Timescales and fees

Application timescales and fees depend on the selected Jersey fund product and any associated regulatory applications.

For a Jersey private fund, we have a 24-hour service-level target for qualifying applications. 

The streamlined timescale depends on the fund meeting the relevant eligibility criteria and the JFSC receiving a complete application and the required fee. Separate timescales and fees may apply to incorporation, AIF-related applications or other associated permissions.

For other fund categories, applicants should refer to the application guidance and current fee schedule for the selected fund route. The overall assessment may take longer where the structure includes novel custody, tokenisation, DeFi, retail distribution or other higher-risk features.

Separate fees may apply in respect of the fund application or certificate, fund services business or other regulatory applications, COBO consent, AIF applications or notifications, Registry incorporation or registration, principal and key person applications, or subsequent changes. Professional adviser, audit, administration, custody and technology costs are separate from JFSC fees.

Useful links