Hedge Funds and Cryptocurrencies : A Top-Down Analysis

Cryptocurrencies and blockchain-based technologies represent one of the most debated topics in the financial services landscape. In this respect, during the past months several institutional investors, and namely hedge funds and their managers, have demonstrated a growing interest in the aforesaid field. The present article aims to elucidate the regulatory treatment of hedge funds investing into cryptocurrencies, focusing in particular on the regulatory framework currently in force in Malta, the first EU country which regulated collective investment schemes investing into cryptocurrencies and currently focused to create a crypto-friendly environment for asset managers and service providers.Starting from a breakdown on the notion of cryptocurrency according to the EU and Maltese legal framework, the paper will highlight the main features of the set-up and licensing process applicable to hedge funds investing into cryptocurrencies and will elucidate the industry-specific risks related to cryptocurrencies and the regulatory and operating pitfalls which hedge fund managers may incur into when setting up a fund investing into cryptocurrencies