How to set up a cryptocurrency investment funds in the United Arab Emirates (UAE) : complete guide and strategic advice from Meyran Partners

The United Arab Emirates (UAE) has established itself as a global hub for cryptocurrencies and blockchain technologies, offering an innovative and regulated environment for the creation of cryptocurrency investment funds. Thanks to progressive regulations and a favorable business ecosystem, the UAE is an attractive destination for investors looking to capitalize on digital assets.

1. What is a cryptocurrency investment fund?

A cryptocurrency investment fund is a financial vehicle that pools capital from multiple investors to invest in a diversified portfolio of digital assets, such as Bitcoin (BTC), Ethereum (ETH), and other altcoins. These funds can be structured to cater to different investor profiles, from financial institutions to high-net-worth individuals.

2. Why set up a cryptocurrency fund in the UAE?

The UAE offers several advantages for establishing a cryptocurrency investment fund:

• Regulatory clarity: Jurisdictions like the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) offer clear regulatory frameworks, enhancing investor confidence.

• Tax efficiency: The UAE offers favorable tax conditions, with no capital gains tax on cryptocurrency transactions.

• Advanced infrastructure: Access to cutting-edge financial technologies, blockchain platforms, and a dynamic fintech ecosystem.

• Global connectivity: Strategic location connecting markets in Asia, Europe, and Africa.

3. Regulatory framework for crypto funds

a) DIFC and ADGM regulations

• The Dubai Financial Services Authority (DFSA) regulates crypto-related activities within the DIFC, focusing on compliance with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) regulations.

• The Abu Dhabi Financial Services Regulatory Authority (FSRA) oversees the ADGM, providing comprehensive guidelines for Virtual Asset Service Providers (VASPs).

b) Freezone activities: the case of RAK DAO

In addition to traditional jurisdictions like DIFC and ADGM, certain free zones in the UAE, such as the RAK Digital Assets Oasis (RAK DAO), offer opportunities to conduct crypto-related activities without being subject to the strict regulatory requirements of major financial authorities.

• Regulatory flexibility: RAK DAO allows digital asset activities with simplified compliance requirements.

• Reduced costs: Lower regulatory fees and streamlined administrative procedures.

• Innovative environment: Supports crypto startups and emerging blockchain projects.

This provides an ideal alternative for businesses looking to benefit from a more flexible regulatory framework while developing crypto activities in the UAE.

c) Licensing requirements

To operate legally, a crypto fund must obtain specific licenses, such as:

• Fund manager license: Required for entities managing crypto assets on behalf of investors.

• Custodian license: For companies providing secure custody solutions for digital assets.

• VASP registration: Compliance with international standards set by the Financial Action Task Force (FATF).

4. Types of cryptocurrency investment funds

1. Hedge funds: Focused on high-risk, high-reward strategies, including arbitrage, leveraged trading, and DeFi protocols.

2. Index funds: Offering diversified exposure to multiple cryptocurrencies, reducing volatility risks.

3. Private equity crypto funds: Investing in blockchain startups, NFTs, and emerging crypto technologies.

5. Key considerations for setting up a crypto fund

• Compliance and governance: Implement robust AML/CFT policies, transparent reporting, and secure asset management protocols.

• Risk management: Develop strategies to mitigate the inherent volatility of the cryptocurrency market.

• Technological infrastructure: Ensure the use of secure wallets, blockchain analytics tools, and cybersecurity measures.

• Investor protection: Clear disclosure of risks, fund performance, and legal safeguards.

6. Role of SPVs (special purpose vehicles)

Many crypto funds utilize SPVs to:

• Isolate investment risks: Separate specific crypto assets from the parent company's balance sheet.

• Enhance operational flexibility: Facilitate cross-border transactions and complex investment structures.

• Optimize regulatory compliance: Adapt to different jurisdictions while maintaining a compliant framework.

7. How Meyran Partners can help

At Meyran Partners, we specialize in structuring and managing cryptocurrency investment funds in the UAE. Our services include:

• Legal advisory for crypto fund creation

• Assistance with regulatory licensing in DIFC, ADGM, and free zones like RAK DAO

• Compliance and risk management consulting

• Ongoing support for fund governance and investor relations

Conclusion

With its progressive regulations, strategic location, and thriving fintech ecosystem, the United Arab Emirates is the ideal jurisdiction for launching a cryptocurrency investment fund. Whether you are an institutional investor or an emerging fund manager, Meyran Partners is here to support you at every stage of the process, ensuring regulatory compliance and operational success.