Web3 Funds Going Global: Deconstructing the Compliance Structures of Six Major Global Crypto Funds

Original authors: Zhang Qianwen, Cheng Chuying

introduction

As crypto assets evolve from simple trading to professional asset management, an increasing number of Web3 projects, quantitative trading teams, and high-net-worth individuals are adopting fund structures to manage crypto assets. In this process, the choice of fund legal structure is no longer a matter of form , but a fundamental decision directly related to risk isolation, tax treatment, and long-term compliant operation.

From a regulatory practice perspective, the differences in fund establishment systems, regulatory requirements, and tax arrangements across different jurisdictions determine the appropriate investment strategies and fundraising targets for each. Whether it's multi-strategy quantitative trading, primary market investment, or family office asset allocation, there is no "optimal structure," only a "suitable structure" that matches the business model.

This article will dissect the structures of six major global crypto funds, analyze their core mechanisms and applicable scenarios, and provide a reference for managers' compliance strategies.

Cayman SPC: A "Umbrella Company" Suitable for Multiple Strategies in Parallel.

SPC (Separate Portfolio Company) is a type of company in the Cayman Islands, characterized by the ability to establish multiple independent portfolio companies (SPs) under a single legal entity.

• Core mechanism: Risk isolation

Each SP's assets and liabilities are legally separated. For example, if strategy A loses money, its creditors can only seek repayment from strategy A, not from strategy B. This is crucial in the volatile crypto market, effectively preventing the collapse of one strategy from dragging down the entire portfolio.

• Applicable scenarios:

When managers operate both high-risk and low-risk strategies simultaneously, SPCs allow each to operate independently without interference . Furthermore, if a new product is desired, a new sub-fund can be established under the existing SPC without requiring a new company registration, resulting in low cost and speed. This is ideal for teams looking to quickly incubate new strategies.

Cayman ELP: A Partnership Structure Suitable for Primary Market Investment

Unlike the corporate structure of SPCs, ELPs are partnerships established under the Exempt Limited Partnership Act. They do not have independent legal person status, but rather are contractual relationships consisting of general partners (GPs) and limited partners (LPs). ELPs are widely used in venture capital (VC) and private equity (PE) fields.

• Core Mechanism: Clear Division of Labor

GP (General Partner) is responsible for managing money and investing, and assumes unlimited liability (in practice, a limited liability company is often used as GP to isolate risk); LP (Limited Partner) only provides capital, does not participate in management, and its liability is limited to the amount of its capital contribution.

• Applicable scenarios:

Primary market investments involve complex profit distribution, which can be flexibly agreed upon in a partnership agreement regarding how and when profits will be distributed. Furthermore, ELPs offer tax transparency; no taxes are paid at the fund level, and the LP list does not need to be disclosed to the public, thus balancing tax efficiency and privacy protection.

BVI-Approved Fund: An "Entry-Level Compliance Solution" Suitable for Small Teams

For small, startup teams , BVI (British Virgin Islands) approved funds offer a low-compliance-threshold, cost-effective option.

• Core mechanism: Registration system, simplified supervision

The setup process is fast, typically taking only two to three days after submitting the application materials. Hiring an auditor or a local custodian is not mandatory, significantly reducing operating costs.

• Applicable Scenarios

This is suitable for teams with assets under management under $10 million that are still in the strategy validation phase . It allows for the establishment of a compliant entity and the accumulation of a track record at a relatively low cost. The maximum number of investors is 20, and the maximum asset size is $100 million, making it suitable for fundraising through personal networks or communities.

Singapore VCC: An "Onshore Fund Structure" Balancing Compliance and Practicality

VCC (Variable Capital Company) is a fund structure introduced in Singapore that retains the flexibility of offshore funds while being backed by the regulatory authority of the Monetary Authority of Singapore (MAS).

• Core Mechanism: Umbrella Structure + Tax Incentives

VCCs also support multiple sub-funds for asset segregation. Most importantly, they can apply for 13O/13U tax exemptions, meaning eligible investment income is tax-free and dividends are not subject to withholding tax.

• Applicable Scenarios

This is suitable for teams looking to set up an office in Singapore, obtain work visas, and establish a family office . It offers both internationally recognized compliance and protection of investor privacy (shareholder register is not publicly available), making it highly attractive to capital seeking long-term stability.

Hong Kong LPF: A "Cross-border Fund Channel" Connecting Asian Markets

LPF (Limited Partnership Fund) is a localized fund structure launched in Hong Kong, modeled after Cayman ELP. It is registered and managed in Hong Kong and governed by Hong Kong laws.

• Core Mechanism: Localized Limited Partnership

Structurally similar to the Cayman ELP, but all legal matters and account opening communications are completed locally in Hong Kong, with no time difference or language barriers.

• Applicable Scenarios

If the team is primarily based in Asia, LPF offers great convenience in terms of legal support, bank account opening, and routine maintenance. Furthermore, Hong Kong's Uniform Fund Exemption Scheme (UFE) allows eligible funds to enjoy profits tax exemption, resulting in a relatively favorable tax environment.

Hong Kong OFC: An "open-ended fund structure" suitable for public offerings or ETFs.

OFC (Open-End Fund Corporation) is a type of corporate open-ended fund with independent legal person status, which can flexibly respond to investors' subscriptions and redemptions.

• Core mechanism: Variable share capital, flexible structure

OFC can increase or decrease its shares at any time according to subscription and redemption needs, breaking through the restrictions on capital reduction of traditional companies. It can conduct private placements or apply for public offerings (subject to SFC approval).

• Applicable scenarios:

To encourage the development of OFCs (Other Funds Invested by Funds), the Hong Kong government provides reimbursement for up to 70% of setup costs (up to HK$1 million per unit), effectively reducing start-up costs. Furthermore, OFCs are currently one of the mainstream structures for issuing virtual asset ETFs and raising funds from the public in Hong Kong, making them suitable for highly liquid trading strategies .

Overview of the six core architectural features

Based on the above analysis, the legal characteristics and applicable scenarios of the six mainstream fund structures are summarized as follows:

Conclusion

In the realm of crypto assets, the question of fund structure has never been "whether to establish one," but rather " when to establish one and in what form ." Different legal structures correspond not only to how taxes are paid and how regulations are implemented, but also to how risks are borne, how investors participate, and how the future operating model will be viable.

The fund structures described in this article are neither inherently good nor bad; the key is whether they match your business model, investment strategy, and target investors . For managers who are already operating or planning to operate crypto assets in the form of funds, clarifying and finalizing the structure early on is itself an important form of risk control.