Irish Regulated Funds – The Ascent of Crypto

The European financial regulators continue to warn consumers that many crypto-assets are risky and are not suited for most retail consumers as an investment or as a means of payment or exchange. However, two recent fund approvals by the Irish regulator, The Central Bank of Ireland (the “CBI”) are being discussed as perhaps opening a new chapter for regulated investment funds that have exposure to crypto assets.

Authorized Investment funds that are authorized in Ireland are generally set up as either Undertakings for Collective Investment in Transferable Securities (UCITS) or non UCITS funds, Alternative Investment Funds (AIFs). There are two main types of AIF in Ireland, the Qualifying Investor AIF (“QIAIF”) and the Retail Investor AIF. The two fund approvals in question that were approved by the CBI were QIAIFs whose investment objective involved investing in cash-settled Bitcoin Futures traded on the Chicago Mercantile Exchange. In the case of a QIAIF seeking to gain exposure to crypto-assets, the relevant QIAIF would have needed to make a submission to the CBI outlining how the risks associated with such exposures could be managed effectively by an alternative investment fund manager. 

The approved QIAIFs will only be marketed to qualified investors, i.e., well-informed and professional investors and as the QIAIF is not subject to investment or borrowing restrictions, it can be used for a wide range of investment purposes.

The QIAIF has a proven track record as a regulated and flexible solution for alternative investment managers.

We at Clark Hill work with the market leaders in the administration, management, and depositary services in the establishment of QIAIFs and we look forward to working with new and existing clients who are desirous of investing in crypto-assets via a regulated structure.