Step-by-Step Process to Launch a Crypto Fund in ADGM, Abu Dhabi

John A3 days ago

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Step-by-Step Process to Launch a Crypto Fund in ADGM, Abu Dhabi

Establishing a crypto fund in the Abu Dhabi Global Market (ADGM) is a strategic move for asset managers, venture capitalists, and institutional investors seeking exposure to the rapidly growing world of digital assets. The region is known for its transparent, progressive, and supportive regulatory framework for crypto-related financial products. As a premier fund setup and advisory firm, FundSetup offers in-depth expertise and full-cycle support for clients launching crypto fund in ADGM.

This comprehensive guide will walk you through the step-by-step process to launch a crypto fund in ADGM, from selecting the right fund structure to obtaining regulatory approvals, incorporating your entity, and preparing for investor onboarding.

Why Choose ADGM for Crypto Fund Formation

The Abu Dhabi Global Market (ADGM) has positioned itself as a leading jurisdiction for digital asset activities, offering clarity, investor protection, and access to global capital. The Financial Services Regulatory Authority (FSRA), the financial regulator of ADGM, introduced one of the world’s first regulatory frameworks for virtual assets in 2018, encouraging innovation while maintaining high standards for financial integrity.

Key Advantages of Setting Up in ADGM:

Internationally recognized regulatory environment
100% foreign ownership and tax neutrality
Clear legal framework for digital asset activities
Access to a strong investor base in the Middle East and globally
Robust infrastructure with regulatory sandbox and fintech support
Flexible fund structures tailored for qualified investors

By choosing ADGM, fund managers gain a transparent and secure environment to operate crypto investment funds that appeal to sophisticated investors.

Step 1: Determine the Crypto Fund Structure

The first step in the process is selecting the most appropriate fund structure based on your investment goals, target investors, and fund strategy. ADGM supports various fund types under its fund regime, including:

Qualified Investor Funds (QIF)
Exempt Funds
Retail Funds

For most crypto funds, especially those targeting high-net-worth individuals and institutions, the Qualified Investor Fund (QIF) is the ideal structure. It allows for:

A minimum subscription requirement of USD 500,000
A cap of 100 investors
Simplified approval process
Exemption from detailed prospectus requirements

You will also need to decide on the legal entity type of your fund. Common options include:

Private Company Limited by Shares (Ltd)
Limited Partnership
Protected Cell Company (PCC) for umbrella funds with multiple sub-funds

Selecting the right structure will affect operational efficiency, risk segregation, and investor appeal.

Step 2: Appoint a Fund Manager

Every fund in ADGM must appoint a Fund Manager that is authorized by the FSRA. You can either:

Establish a new fund management company within ADGM and apply for a Category 3C license, or
Engage an already licensed fund management entity (external manager)

The Category 3C license allows the fund manager to manage assets, including virtual assets, and carry out fund management activities within ADGM.

To apply for the Fund Manager license, the following requirements must be fulfilled:

Detailed business plan outlining operations and governance
Submission of organizational chart with roles and responsibilities
Appointment of competent directors and compliance officer
Capital adequacy requirements as mandated by FSRA
A clear operational model for investment management and risk controls
Regulatory filings including KYC/AML policy, IT controls, outsourcing policy, etc.

This step typically takes 6–8 weeks depending on the quality of documentation and responsiveness of the applicant.

Step 3: Prepare Legal and Fund Offering Documents

Comprehensive and compliant fund documentation is essential for investor protection, regulatory review, and operational transparency. FundSetup assists clients in drafting the necessary documents tailored to FSRA standards.

Essential documents include:

Private Placement Memorandum (PPM): Describes the fund’s strategy, asset class, risks, fees, redemption terms, and compliance disclosures.
Constitutional Documents: These define the fund’s legal existence, governance structure, and shareholder rights.
Subscription and Redemption Agreements: These govern the entry and exit process for investors.
Investment Management Agreement (IMA): If the fund manager is separate from the fund, this agreement specifies roles, fees, and performance metrics.
Compliance Manuals: Covers AML/CTF, KYC policies, risk management, and internal audit procedures.

These documents must be reviewed and approved by the FSRA before proceeding to formal launch.

Step 4: Apply for FSRA Approval (Fund and Manager)

With the legal documents and fund manager structure in place, you can begin the formal application process with the Financial Services Regulatory Authority (FSRA).

Both the fund entity and the fund manager must undergo regulatory scrutiny.

Fund Manager Application Includes:

Company incorporation documents
Business plan and financial projections
Background checks for directors and shareholders
Corporate governance framework

Fund Application Includes:

Offering documents and constitutional documents
Investment strategy and asset selection process
Details of investors and minimum subscription
Proof of fund custody, banking, and administration arrangements

The FSRA conducts a thorough review and may request clarifications or amendments. The entire licensing and approval process can take 6 to 12 weeks, depending on complexity and preparedness.

Step 5: Incorporate the Legal Entity in ADGM

Once provisional approval is granted by the FSRA, the fund legal entity must be incorporated through the ADGM Registrar of Companies (ROC).

This includes:

Selection of a legal structure: Company, PCC, or partnership
Choosing a business name compliant with ROC guidelines
Filing incorporation forms and paying fees
Submitting MOA, AOA, and shareholder details
Appointing directors and compliance officers

Upon successful registration, the fund is legally incorporated and can begin operations.

Step 6: Establish Banking and Custody Infrastructure

One of the key challenges in launching a crypto fund is setting up banking and custodial arrangements, given the regulatory sensitivities around virtual assets.

FundSetup supports clients in opening:

Fund Bank Accounts with ADGM-approved financial institutions
Custodian Accounts with regulated crypto custodians
Wallet and Storage Solutions, including cold wallets and multisig setups

This step is crucial for safeguarding investor funds, maintaining security, and ensuring regulatory compliance in asset storage and movement.

Step 7: Investor Onboarding and Capital Deployment

Once operational readiness is achieved, the fund can be officially launched. This involves:

Launching marketing and investor communication (in compliance with FSRA guidelines)
Receiving subscriptions and executing KYC/AML checks on investors
Issuing fund units or shares and maintaining the shareholder register
Allocating capital to digital asset strategies as per the fund’s investment policy

A robust fund administration system should be in place to manage capital inflows, redemptions, and NAV reporting.

Step 8: Ongoing Regulatory Compliance and Audit

FSRA requires all crypto funds to maintain rigorous internal controls and reporting procedures. The Fund Manager must ensure:

Periodic submission of regulatory reports to FSRA
Ongoing AML/CTF monitoring and risk assessments
Annual financial audit by an ADGM-approved auditor
Internal audits and compliance reviews
Investor reporting and NAV calculation in line with international accounting standards

Non-compliance can lead to penalties or suspension of the fund, so this phase is critical for long-term sustainability.

FundSetup: Your Strategic Partner for Crypto Fund Formation in ADGM

At FundSetup, we offer full-service support to clients looking to launch digital asset and crypto funds in ADGM. With our team of legal experts, compliance professionals, and regulatory consultants, we help you: