Crypto Funds: The New Frontier of Asset Management. Understanding Custodians, Managers and Risks

Luxembourg is the second largest fund management center globally after the US, with strong positioning for crypto funds and regulated custody services

Three main types of crypto investment vehicles are emerging:

• Traditional crypto funds investing in cryptocurrencies and tokens
• Tokenized traditional funds
• ETFs/ETPs tracking crypto assets

Key requirements for regulated crypto funds include:

• Licensed fund manager (AIFM)
• Depository bank
• Regulated custodian for private key management
• Compliance with local regulations

Growing institutional interest driven by:

• Regulated frameworks providing investor protection
• Professional portfolio management
• Easier access compared to direct crypto investment
• Integration with traditional financial infrastructure

Major trends shaping the space:

• BlackRock and traditional players entering via ETFs
• Rising demand for stablecoins and yield-bearing instruments
• Increased focus on tokenization of real-world assets
• Growth in Web3/early-stage token investments
• Need for 24/7 trading and settlement capabilities

Regulatory landscape is evolving with:

• MiCA framework harmonizing rules in Europe
• DLT pilot regime enabling experimentation
• Country-specific approaches creating competition
• Growing number of licensed VASPs and custodians

Market size potential:

• Traditional fund industry in Europe ~€10 trillion
• Crypto assets estimated at €50 billion opportunity
• BCG projects 10% of GDP could be tokenized by 2030