The financial world is undergoing a transformation, and one of the most promising innovations is the rise of tokenized funds. By combining traditional investment fund models with blockchain technology, tokenized funds offer increased liquidity, transparency, and accessibility. As more asset managers explore this frontier, choosing the right jurisdiction becomes a critical decision.
This guide explores the leading jurisdictions for establishing tokenized funds—Malta, the Cayman Islands, Bermuda, the British Virgin Islands (BVI), and Singapore—highlighting regulatory frameworks, structural options, and key compliance considerations.
Understanding Tokenized Funds
A tokenized fund is a collective investment scheme that issues digital tokens on a blockchain to represent ownership or profit-sharing rights. These tokens function like traditional fund shares but are issued, transferred, and managed using smart contracts.
Tokenization brings significant advantages:
- Enhanced liquidity through secondary market trading
- Lower entry barriers via fractional ownership
- Automated compliance using programmable rules in smart contracts
- Global investor access with reduced intermediaries
However, because these tokens often qualify as securities, they are subject to financial regulations in both the fund’s home jurisdiction and where investors reside.
👉 Discover how blockchain is reshaping investment fund structures.
Malta: The EU’s Crypto Hub
Malta has positioned itself as Europe’s "Blockchain Island" with a forward-thinking regulatory framework. Its three core laws—the Malta Digital Innovation Authority Act (MDIA), the Innovative Technology Arrangements and Services Act (ITASA), and the Virtual Financial Assets Act (VFAA)—create a comprehensive environment for crypto-based financial products.
For tokenized funds, the Professional Investor Fund (PIF) is the most suitable structure. Regulated by the Malta Financial Services Authority (MFSA), PIFs cater to professional and high-net-worth investors with fewer restrictions than retail funds.
Key features:
- Minimum investment: €100,000 per investor
- Can be structured as a Variable Capital Investment Company (SICAV) for flexibility
- Allows tokenization of non-voting shares while retaining voting shares for fund sponsors
- Self-managed or externally managed options
- No requirement for a Maltese-based administrator or custodian
- Potential tax exemption on capital gains and income if structured properly
PIFs must comply with AML regulations and appoint an AML Compliance Officer (AMLCO) and Money Laundering Reporting Officer (MLRO). While PIFs cannot be marketed EU-wide without national approvals, Malta’s EU membership offers strategic advantages.
The Cayman Islands: The Offshore Leader
The Cayman Islands remains the dominant jurisdiction for offshore funds, hosting over two-thirds of global hedge and private equity funds. Its tax-neutral status, political stability, and flexible regulatory regime make it ideal for tokenized fund formation.
Regulated by the Cayman Islands Monetary Authority (CIMA) under the Mutual Funds Law, tokenized funds typically take the form of registered funds or administered funds, both established as exempted companies.
Registered Funds
- Open-ended structure with minimal regulatory burden
- No licensing required—only registration with CIMA
- Minimum investment: $100,000 per investor
- No requirement for local administrators or custodians
- Management can be based locally or offshore
Administered Funds
- Require appointment of a CIMA-licensed fund administrator
- No per-investor minimum investment, making them suitable for broader distribution
- Main office must be in the Cayman Islands
Both structures must:
- Appoint an AMLCO, MLRO, and FATCA/CRS reporting officer
- Undergo annual audit by a CIMA-approved firm
The Cayman model offers speed, privacy, and scalability—ideal for launching compliant tokenized funds targeting global accredited investors.
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Bermuda: Regulatory Clarity Meets Innovation
Bermuda has emerged as a leader in crypto regulation with two key laws: the Initial Coin Offering Act 2018 (ICO Act) and the Digital Asset Business Act (DABA). These provide legal certainty for blockchain-based fundraising and operations.
Under the Investment Fund Act 2016, tokenized funds can be established as Class A or Class B Exempt Funds, typically as exempted companies.
Class A Exempt Funds
- Must appoint a regulated fund manager (licensed by BMA or equivalent foreign regulator)
- Or have over $100 million in assets under management (AUM)
- Faster setup: approval within one business day
Class B Exempt Funds
- Can appoint an unregulated manager
- Require formal application to BMA; approval within 10 days
- May need additional licensing under the ICO Act depending on distribution method
Both classes:
- Target qualified investors only (individuals with $1M+ net worth or $200K+ annual income)
- Require appointment of auditor, custodian, administrator, and local representative
- Benefit from Bermuda’s tax-neutral environment
Bermuda’s proactive stance makes it attractive for compliant, institutional-grade tokenized funds.
British Virgin Islands (BVI): Flexible and Efficient
The BVI is another premier offshore jurisdiction known for its efficient corporate regime and strong legal system. Regulated by the Financial Services Commission (FSC), BVI offers several fund structures suitable for tokenization.
Professional Funds
- Minimum investment: $100,000
- Open to investors with $1M+ net worth
- Requires submission of offering memorandum and business plan to FSC
Private Funds
- Limited to 50 investors or issued on a private basis
- No minimum investment threshold
- Suitable for closed-group or syndicated investments
Incubator Funds
- Fastest and simplest structure
- Maximum AUM: $20 million
- Minimum investment: $20,000
- Can be self-managed
- Valid for two years (renewable once)
All BVI fund types require:
- At least two directors (one natural person)
- Appointment of manager, administrator, custodian, auditor, and local representative
- Compliance with AML/KYC obligations
The BVI’s simplicity and low cost make it ideal for early-stage or niche tokenized funds.
Singapore: The Rise of the VCC
Historically overlooked for fund formation due to structural limitations, Singapore is now gaining traction thanks to the Variable Capital Company (VCC) framework introduced under the VCC Act.
The VCC addresses previous drawbacks:
- Can issue and redeem shares without shareholder approval
- Allows capital payments of dividends
- Supports umbrella structures with multiple sub-funds
- Offers accounting flexibility
Managed by a licensed fund manager under the Securities and Futures Act (SFA), VCCs can be public or private. While not inherently crypto-specific, Singapore’s progressive stance on digital assets makes it increasingly viable for tokenized fund launches.
With its strong reputation, deep talent pool, and growing blockchain ecosystem, Singapore could become a major hub for Asia-focused tokenized funds.
👉 See how leading jurisdictions are adapting to digital finance.
Frequently Asked Questions (FAQ)
Q: What is a tokenized fund?
A: A tokenized fund issues blockchain-based tokens representing ownership or profit rights in a collective investment vehicle. These tokens enable fractional ownership, automated compliance, and secondary trading.
Q: Are tokenized funds regulated?
A: Yes. If tokens represent securities, they are subject to financial regulations in both the fund’s jurisdiction and where investors reside. Jurisdictions like Malta, Cayman Islands, and Bermuda have specific frameworks.
Q: Can retail investors participate?
A: Most current structures limit participation to professional or accredited investors due to regulatory complexity. However, future developments may expand access.
Q: How are investor restrictions enforced?
A: Through KYC/AML checks and embedded rules in smart contracts that verify eligibility before allowing token transfers.
Q: Is tax efficiency possible?
A: Yes. Jurisdictions like the Cayman Islands, BVI, and Malta offer tax-neutral environments when structured correctly. Always consult tax professionals.
Q: Do I need a local team in the chosen jurisdiction?
A: Requirements vary. Malta and Bermuda require local representatives; Cayman and BVI allow fully offshore management with approved service providers.
Final Thoughts
Choosing where to establish a tokenized fund depends on your target investors, asset class, scalability goals, and compliance priorities. The Cayman Islands leads in flexibility and global recognition, while Malta offers EU integration. Bermuda provides cutting-edge regulation, BVI delivers efficiency, and Singapore’s VCC opens doors in Asia.
Regardless of location, success requires integrating legal compliance, robust technology, and investor protection from day one. As blockchain reshapes finance, early movers who build on solid foundations will define the future of investing.