Crypto incubator fund: All you need to know

Crypto incubator fund

Cryptocurrency has slowly but surely made its way into our lives. Over the last decade, it’s evolved from an underground concept to something almost everyone has heard of. But it’s not just a unit of currency. Cryptocurrency can be invested and pooled into investment funds in the same way fiat currency is. But what exactly is a crypto incubator fund, what are their benefits, and where should you locate yours?

What is an incubator fund?

An Incubator Fund gives starter managers the chance to build a name for themselves in the fund management sector. Low in cost and simple to set up, an incubator fund keeps costs minimal while simultaneously attracting capital. Over the long term, this capital grows and becomes viable. After the term of the fund is up, it’s either closed or converted into an approved fund.

If structured and managed well, incubator funds can provide multiple opportunities for hedge fund managers. An incubator fund benefits from a secure environment with structured conditions. These facilitate the development of investment strategies over a certain period.

An incubator fund can exist for two years, with the option to extend for another year. Once that period has elapsed, it’s changed to another kind of fund. This could be a Private Fund, Professional Fund, or as in most cases, an Approved Fund.

The most popular location for incubator funds is the British Virgin Islands. Incubator funds there must meet the following criteria:

  • Maximum of 20 investors
  • Each investor with a minimum of $20,000 investment
  • Maximum market cap of $20 million
  • Submission of annual financial statements and semi-annual returns

There are also other requirements and obligations related to directors, representatives, and licensing fees.

What is crypto?

Cryptocurrency, otherwise known as crypto or virtual currencies are units of digital currency. Transactions in crypto are verified and registered on a decentralized ledger called a blockchain and are secured with cryptography. Examples of crypto include Bitcoin, Ether, Litecoin, Ripple, and Bitcoin Cash. There are hundreds of different cryptocurrencies out there, some more popular than others. A number of central banks are also considering their own cryptocurrencies, pegged to their fiat equivalent. 

The use and adoption of cryptocurrency is increasing rapidly. More and more investors are using it and seeking to invest in cryptocurrency projects.

What is a crypto incubator fund?

A crypto incubator fund is an incubator fund that contains cryptocurrencies. The fund could be specific to one cryptocurrency such as bitcoin or ether, or it could contain a combination of other currencies.

When the crypto incubator fund is created, investors can input whatever cryptocurrency they want or is allowed. It’s important however that the value of the deposits do not exceed the market cap allowed by the regulator. If the value of the cryptocurrencies in the fund exceeds the limit, a solution must be found, such as upgrading the fund to an approved fund or similar.

This fund is used in the same way as a regular fiat fund. It can be used to invest in companies or projects of any kind.

Why should I choose BVI for my crypto incubator fund?

BVI is a great choice for a crypto incubator fund. Firstly, it’s a jurisdiction that allows funds to contain cryptocurrencies without additional requirements. The fund structure and setup remains the same whether it’s fiat or cryptocurrency. Managers will carry out due diligence in the same way they would on fiat investors.

There are many benefits to having a crypto incubator fund in the BVI.

  • Cost-effective incorporating and maintenance fees
  • Custodians not required
  • Ideal for startup or small fund managers
  • Flexible and supportive regulatory regime that’s welcoming to managers and investors
  • High corporate governance standards
  • No need for full prospectus

How can Fast Offshore help?

If you want to start a crypto incubator fund, you will need assistance. Fast Offshore has been working with incubator and approved funds for many years, including in BVI. As a corporate service provider, we’ve helped countless people and entities get off the ground and go on to success. Fast Offshore can take care of all matters relating to the opening and ongoing maintenance of the fund. For all your investment fund needs, whether they are fiat or crypto, Fast Offshore is here to help.

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