Conyers’ Barnabas Finnigan and Eric Flaye on how offshore jurisdictions have positioned themselves to take advantage of recent developments
The development of blockchain applications and the rapid growth of cryptocurrencies and other virtual assets have opened up new opportunities in the fintech space in recent years. Increasingly, sophisticated investors are seeking ways to access this niche sector.
We have seen a flurry of investment funds being established to focus on decentralised finance (De-Fi) platforms and cryptocurrencies, while other entrants undertake coin and token offerings and establish virtual asset-trading platforms.
PwC’s 3rd Annual Global Crypto Hedge Fund Report 2021 highlights the sector’s rapid expansion, noting that total assets under management (AUM) of crypto funds almost doubled from 2020 to 2021, rising from US$2bn to US$3.8bn. Traditional hedge funds are actively embracing this trend, with around 20% currently investing in digital assets, and over 25% of fund managers not currently invested in this asset class actively planning to do so. The report also highlights the UK’s importance in this space, being second only to the US as the jurisdiction of choice for managers of crypto-focused funds.
Notwithstanding the UK’s role in originating and managing investments in digital assets, De-Fi structures and crypto-focused funds are still predominantly structured through more traditional fund jurisdictions, including the US, Cayman Islands, British Virgin Islands (BVI) and Bermuda.
Offshore jurisdictions have positioned themselves to take advantage of recent developments and put in place the appropriate regulatory frameworks to support this growing industry.
Cayman Islands
The Cayman Special Economic Zone has a strong focus on supporting fintech-related businesses and facilitates the establishment of a physical presence in Cayman by offering fast-tracked incorporation, five-year work permits and duty waivers.
Cayman…
