Crypto investment funds are maturing quickly.
While these assets dipped to their lowest point in November 2024, they have since rebounded to about $130 billion, attracting sophisticated, experienced investors. These investors want to access digital assets without the operational complexity of managing wallets, keys, or evolving protocols.
Yet rapid growth also means more scrutiny. In 2025, U.S. and global regulators have shifted expectations around transparency, custody, and compliance. If you’re considering launching a crypto fund, you need to build it on a foundation of sound legal practices, starting on day one.
Step 1: Choose the right home for your crypto fund
Each jurisdiction maintains different rules for its funds. Regulators, taxes, and operations change depending on the location that you choose to set up your fund.
Key considerations when selecting a jurisdiction
When setting up a cryptocurrency investment fund, you must have a rubric for the factors to consider. If not, you may end up missing out on maximum financial gains.
When selecting a jurisdiction, here are a few considerations to think about:
- Clear regulations: Look for well-defined rules and laws about cryptocurrency to avoid restrictive use of digital assets.
- Your fund’s strategy: Outline your business model, investment strategy, and target investor base. Ensure that the jurisdiction’s regulations don’t impede these goals.
- Taxes: Evaluate how cryptocurrency transactions, capital gains, and fund profits are taxed.
- Reputation: Research what publications say about the country in global finance and the crypto sector.
- Long-term sustainability: Consider the economic and geopolitical issues for the country, assessing if they could cause operational problems.
Popular jurisdictions for cryptocurrency investment funds
Nearly every continent has offerings investors favor when structuring their cryptocurrency investment funds. While the one you choose should depend on their specific needs and goals, some common jurisdictions include:
Europe
- Lichtenstein: Falling under the Financial Market Authority, the country is infamous for fintech-friendly laws and flexible regulation due to the Token and Trusted Technology Service Provider Act.
- Switzerland: Home of “Crypto Valley,” a global crypto hub under FINMA’s regulatory oversight.
Americas
- Cayman Islands: One of the most popular offshore fund jurisdictions. Due to the Virtual Assets Service Providers Act, the nation offers clear regulatory guidance.
- Bermuda: Investors enjoy the zero-tax regime, and the Digital Asset Business Act provides clear regulatory rules.
- United States: The SEC and CFTC set robust and complex regulations, but many crypto funds thrive in states like Wyoming, Texas, and New Jersey.
- States like Arizona and Nevada offer regulatory sandboxes that provide crypto funds with safe harbor exemptions during early operations. The OCC has also issued guidance that allows national banks to custody crypto assets. This can further increase the legitimacy of U.S.-based fund structures.
- States like Wyoming, Tennessee and Utah are popular, as they allow for the creation of Decentralized Autonomous Organization Limited Liability Companies (DAO LLCs).
DAO LLCs are particularly useful in the cryptocurrency world because they offer the protection of a traditional LLC while using smart contracts to facilitate business activities like pooling money, voting on proposals, and executing decisions without the need for an intermediary. Because these transactions are all recorded on a blockchain ledger, it’s a highly transparent, cost-friendly approach.
Step 2: Build a strong foundation by doing your due diligence
Part of building a strong foundation for your cryptocurrency investment fund is your due diligence process.
Start with technical due diligence when drafting your whitepaper. Review the document for any missing pieces regarding the technology, purpose, and roadmap. But that’s not all; review the following as well.
Custody and asset security
Custodians of your crypto assets must be regulated and insured. These trusted third parties are experts who store the assets, utilizing hardware and cryptography to secure them. You must choose a qualified crypto custodian to handle the account. Request documents such as audit reports and insurance policy coverage to assess the provider’s capability.
While many funds rely on regulated custodians, the SEC has addressed emerging self-custody models wherein investors hold their private keys. If you’re taking this approach, it’s important to disclose risks clearly and closely monitor compliance with qualified custodian rules under the Investment Advisers Act.
AML/KYC compliance
When building your foundation, you must be aware of two critical regulatory processes for compliance:
- Anti-Money Laundering (AML): The framework, policies, and procedures implemented to detect and prevent the conversion of illegally obtained funds into legitimate assets.
- Know Your Customer (KYC): Collecting customer information (including name, date of birth, and government ID) before they use a crypto platform.
These compliance measures protect your cryptocurrency investment fund from money laundering, terrorist financing, and other dangerous illegal activities.
Choosing the right assets
To avoid red flags such as excessive concentration of tokens amongst insiders, you must choose the right assets for your crypto investment fund. Analyze token supply, distribution, utility, and incentives before selecting your fund.
If your fund plans to trade crypto derivatives or use leverage, registration with the Commodity Futures Trading Commission (CFTC) as a commodity pool operator or trading advisor may be necessary. Recent CFTC actions have targeted unregistered funds, so early legal guidance can help avoid missteps.
Step 3: Tell investors what they need to know before they ask
Investors should be given documentation before investing in your fund. Help them understand market risks, regulatory uncertainties, fund structures and fees, and asset selection.
Full disclosure requirements
Investors need to know exactly what their assets are funding. Follow the disclosure requirements below and share the information as soon as it’s available:
- A narrative description of the fund’s business, including background, current operations, and plans.
- A list of material risks, including price swings, regulatory uncertainty, legal changes, cybersecurity, custody, operation, technology, and network. These cannot be a cut-and-paste list; they must be specific to your fund’s activities and assets.
- The securities and investor rights, including voting, dividends, liquidation, on-chain or off-chain records, and any special features or limitations.
- Accounting policies and financial statements.
New SEC 2025 rules
As of April 2025, the SEC released a new statement that “clarified the application of federal securities laws on crypto assets.” These SEC rules covered the following areas:
- Description of business
- Risk factors
- Description of securities
- Rights, obligations, and preferences
- Technical specifications
- Supply
In addition to these foundational categories, the SEC requires more granular disclosures that reflect the technical aspects of crypto investments. For example, fund sponsors must explain:
- Who can modify the underlying code of digital assets, and how are those changes governed?
- Have the project’s smart contracts or blockchain protocols undergone third-party security audits? If not, why?
- What liquidity arrangements with market makers could affect price stability or perceived asset value?
Step 4: Avoid hidden compliance traps
Compliance is critical for every crypto investment fund structure. However, there are hidden traps that are easy to fall into. Here are a few that need to be on your radar:
- Rapid growth risk: Don’t scale before your compliance infrastructure is in place. Regulatory breaches occur when compliance staff can’t track everything correctly.
- Policy gaps: Fee reviews, custody, and audits ensure you remain compliant. Failure to update these or stick to your internal policies can trigger an SEC violation.
- Cross-border risks: Expanding into a new jurisdiction means new compliance laws. If you don’t enact programs to meet them, your fund could face massive fines.
Step 5: Market and grow your fund the right way
Once your fund is legally sound and operationally secure, it’s time to focus on strategic growth.
Effective marketing starts with investor education and transparency. Begin by publishing your white paper and investor disclosures early. These materials should communicate your fund’s purpose, strategy, risk profile, and legal structure.
Consider issuing press releases through reputable crypto outlets like Cointelegraph and Decrypt to expand your visibility and credibility in the market.
From there, you can lean into content marketing to build trust and attract interest. Educational blogs, videos, investor guides, and podcasts not only demonstrate thought leadership but also improve search visibility and drive qualified traffic to your fund’s website.
Collaborating with respected voices in the crypto space, including vetted social media influencers, can further amplify your reach.
Whatever channels you choose, always center the message around informed investing. When growing a sustainable crypto investment fund, compliance and credibility go hand in hand.
This article was an overview of the intricacies of structuring a new fund. Contact The Law Offices of Andrew Dressel LLC today to discuss the best legal options for your crypto investment fund.
The content in this article is for general informational purposes only. It should not be construed as legal advice or a substitute for legal advice. The information above does not create an attorney-client relationship, nor do prior results guarantee future outcomes. Any reliance you place on such information is therefore strictly at your own risk.