Luxembourg: towards a proliferation of crypto funds?

Wednesday, April 10, 2024

Several crypto investment fund managers have applied for licences to be allowed to "help" other crypto funds operate. The company 6M has just obtained the green light from the Luxembourg regulator, which is a first in the country. According to our information, other authorisations are expected to follow.

Is this the "BlackRock" effect? What is certain is that for the past few weeks, things have been moving forward for crypto in Europe, and in particular in Luxembourg.

On Tuesday, 6M announced that it had become the first crypto alternative investment fund authorised by the regulator to offer services to other crypto funds, and, according to our information, other players could also get the same green light.

Thanks to its licence, 6M will be able to help other crypto hedge funds ("hedge" funds are only open to "well-informed" investors and the entry ticket is €100,000) with related operational (risks, reporting, etc.) and regulatory issues. 6M will be remunerated by taking an annual percentage on the amounts under management.

Beyond these operational issues, using companies like 6M and their licence will enable crypto funds to change scale, for several reasons:

👉 Firstly because their caps on assets under management will jump. Currently, crypto funds are tolerated in Luxembourg (and Europe as a whole), but above a certain amount, €100 million for example in Luxembourg, they can no longer operate or must have a licence like 6M.

👉 Then because they will be able to be available in all 27 EU member countries. "Today, the vast majority of crypto funds are not regulated and therefore do not benefit from the European passport," explains Julie Bourgeois, head of legality and compliance at 6M.

👉 Finally, because thanks to this regulation, crypto funds will be able to attract institutional investors. "A lot of banks, pension funds and insurers would like to invest, but they can't go through anything other than regulated funds," confides a good industry insider.

In France, the funds XAnge and Cathay Ledger have obtained licences to operate for other crypto funds, but have not made use of them, not least because crypto funds of significant size - in excess of €100 million - do not exist.

This analysis is not investment advice. It has been prepared without taking into account your personal situation, particularly your financial situation, risk profile, and investment objectives.

Before investing in any product, investors should fully understand the risks involved and consult their own legal, tax, financial, and accounting advisors.

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