From the perspective of legal compliance, let's explore the importance of crypto funds for investors.

Written by: Iris, Bai Zhen

About half a month ago, Lawyer Mankun wrote an article titled "What is the Difference Between a Fund and a Foundation? A Must-Read for Compliance Operations of Web3 Projects," which detailed the concept of crypto funds and their applicable scenarios. In summary, a crypto fund is a form of collective investment where investors provide capital and the crypto fund is responsible for finding Web3 projects to invest in for profit.

It seems that crypto funds should be a very popular investment option. However, among the clients that Lawyer Mankun has interacted with, especially non-Web3 native investors, many are unclear about "Why do we need crypto funds? What are the benefits of establishing a crypto fund?"

Therefore, Lawyer Mankun wrote this article to help everyone understand the importance of crypto funds for investors from a legal compliance perspective.

Limitations of Individual Investment

In recent years, the investment wave in Web3 has been continuously rising, attracting more and more individuals and institutions into this field. From cryptocurrencies to NFTs, from DeFi to GameFi, various projects are emerging, seemingly presenting opportunities everywhere. However, investing in Web3 is not as simple as it appears; the underlying legal and compliance issues may catch many investors off guard.

Especially for high-net-worth investors, although individual investment methods seem flexible and free, in practice, whether in terms of the depth of information acquisition or the systematic nature of risk management, the solo approach often fails to meet complex investment needs. More importantly, in a field characterized by rapid technological iteration and a changing legal regulatory environment, individual investors not only need ample time and expertise but also have to deal with significant compliance risks, which raises higher demands on their investment capabilities:

• Information Asymmetry. The development of the Web3 field is rapid, with new projects emerging daily, but their quality varies widely. On the surface, many projects promise to "transform the future," but in reality, they may just be scams wrapped in technology. For Web3 investors, filtering out truly valuable long-term investment targets from numerous projects is undoubtedly a huge challenge. This issue is exacerbated when it comes to cross-border investments, where complex legal environments and cultural differences further intensify information asymmetry.

• High Volatility Concerns. The Web3 investment market is known for its high volatility, which, while offering significant wealth creation opportunities, also comes with a correspondingly high failure rate. Individual Web3 investors often tend to concentrate their funds in a few projects due to resource limitations. While this strategy may seem to yield higher returns in the short term, it exposes them to extremely high risks due to lack of diversification.

• Compliance Challenges. The global nature of Web3 makes its legal and regulatory environment extremely complex. For Web3 investors, individual investments not only face risks from the projects themselves but also have to deal with compliance issues in cross-border transactions, such as foreign exchange management, tax reporting, and the legal classification of tokens. Improper handling can lead to unexpected legal problems.

• Insufficient Professional Support. Web3 investment is not simply about "buying low and selling high"; it involves a series of professional operations such as project due diligence, technical assessment, and market analysis. For Web3 investors, lacking professional team support means they cannot fully assess the potential risks and opportunities of their investments.

Time and energy constraints. Web3 investors, especially non-native users, are often busy with daily affairs and find it difficult to devote enough time and energy to managing Web3 investments. However, Web3 investments require real-time tracking of market dynamics and handling complex technical and legal issues, which places high demands on individual investors' time and energy.

Advantages of Crypto Funds

The limitations of individual investment create numerous barriers for high-net-worth individuals to participate in Web3 investments, while crypto funds, with their professional operations and systematic management, become an important tool to overcome these challenges.

First, funds systematically filter high-quality projects through in-depth due diligence by professional teams, addressing the issue of information asymmetry. The fund's investment analysts evaluate target projects from multiple angles, including technical architecture, team background, and market prospects, and use on-chain data to monitor the health of the ecosystem, ensuring that every investment is based on solid data. Additionally, the fund's global network allows it to cover high-quality projects from multiple regions worldwide, enabling investors to easily access cutting-edge Web3 investment opportunities.

Second, crypto funds hedge the high volatility risks of the Web3 market through diversified investment strategies. By allocating funds across stablecoins, DeFi, NFTs, and other areas, the fund avoids the concentration risk associated with the failure of a single track. Meanwhile, the fund management team monitors market dynamics in real-time and flexibly adjusts the investment portfolio based on market changes, creating more stable return expectations for investors through professional means.

More importantly, the team-based operation of crypto funds provides high-net-worth investors with full-process support, covering all aspects of investment from due diligence to project management. The fund team not only helps investors solve complex issues such as technical assessment and legal compliance but also regularly publishes detailed investment reports, allowing investors to stay informed about investment progress without expending significant time and energy.

Compared to the solo approach of individual investors, crypto funds effectively mitigate issues such as information asymmetry and concentrated risks through team-based professional support. This also meets the higher demands of Web3 investors for wealth security, giving crypto funds a natural advantage in Web3 investments.

Compliance is Key

In many past Web3 investment consultations, a common question Lawyer Mankun has encountered is: "Is my investment in Web3 illegal? How can I invest safely?" Each time faced with such inquiries, Lawyer Mankun's response has been: it is advisable to establish a crypto fund.

In the wave of Web3 investments, crypto funds not only solve project selection and risk management issues through professional operations but, more importantly, they help investors enter this complex and ever-changing market in a legal and compliant manner. This is especially crucial for high-net-worth investors in China, where virtual asset trading is strictly restricted, making compliance particularly important, and crypto funds demonstrate unique advantages in this area.

1. Legal Structure

Crypto funds typically operate by registering as professional investment institutions and choosing legal fund structures that comply with international regulatory requirements, providing clear legal protection for investors. For example, Lawyer Mankun has shared that some mainstream crypto funds choose to register in the Cayman Islands, Singapore, or Hong Kong, where the legal environment for crypto asset investment is relatively relaxed, and tax incentives and ease of capital flow reduce costs for investors.

It is particularly noteworthy that due to foreign exchange management policies, individual investors in China face greater difficulties in directly participating in cross-border investments. Crypto funds, by establishing compliant RMB capital pools, can legally and compliantly convert funds into foreign currency, helping investors connect with international markets in a professional manner and avoiding legal risks that may arise from incomplete procedures in personal operations.

2. Compliant Operations

The global nature of the Web3 field makes its regulatory environment extremely complex, with significant differences in how different countries define and regulate virtual assets. For instance, the U.S. has strictly defined the securities characteristics of certain tokens, while China has explicitly prohibited virtual currency trading activities.

Therefore, to provide comprehensive compliance support for investors, fund teams typically collaborate with legal experts familiar with local regulatory policies. Lawyer Mankun's firm has previously provided establishment services for several Web3 investors' crypto funds, and during the establishment process, we offer detailed legal analysis and compliance advice tailored to investment projects in different countries, ensuring that investment activities comply with local laws.

3. Strict Anti-Money Laundering and KYC

The decentralized nature of the Web3 investment market often makes it a high-risk area for money laundering and other illegal activities. For individual investors, it is challenging to verify the backgrounds of project parties or trading counterparts when participating in such transactions, and a slight misstep could lead to involvement in illegal activities.

Crypto funds must strictly adhere to anti-money laundering (AML) and know your customer (KYC) regulations in their operations, ensuring the legality of fund sources and the transparency of investment activities through measures such as reviewing investor identities and monitoring fund flows. This not only effectively reduces the legal risks of the fund itself but also provides investors with a safer investment environment.

4. Dispersed Legal Liability

Direct participation in Web3 investments may expose individuals to legal accountability due to project violations or legal changes. In contrast, by investing through a crypto fund, investors, as limited partners, only bear limited liability for their contributed capital, while the fund management team is responsible for the actual investment operations and legal compliance. This mechanism of liability dispersion provides investors with greater legal security.

At the same time, the asset isolation mechanism of crypto funds strictly separates investor funds from the assets of the fund management team. This isolation not only prevents the debt issues of the fund management team from affecting investor rights but also ensures the independence and security of investment funds, further enhancing high-net-worth individuals' trust in fund operations.

Summary by Lawyer Mankun

In the face of the high risks and high potential of the Web3 investment field, crypto funds, with their unique professional management and compliant operations, have become the best choice for high-net-worth investors to participate in this area. However, when establishing a crypto fund, choosing a suitable jurisdiction is particularly important. Different regions have varying regulatory requirements, tax policies, and operational flexibility for crypto funds, which directly impact the fund's compliance and cost efficiency.

As Hong Kong gradually opens its policies in the virtual asset field, various favorable policies have emerged, providing strong support for the establishment of crypto funds. Additionally, Hong Kong's geographical location at the crossroads of East and West makes it an ideal bridge for global capital to enter the Web3 market.

Currently, Lawyer Mankun's firm has an experienced professional team in Hong Kong that can provide one-stop services for the establishment of crypto funds for Web3 investors. From site evaluation to registration completion, and cross-border compliance review, we will combine the localized policy environment with a crypto-friendly legal framework to help investors achieve safe and compliant asset investments. If you are considering establishing a crypto fund or need more details, feel free to contact Lawyer Mankun at: mankunlawyer (WeChat ID), and we will ensure a smooth journey for your Web3 investment.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。