The United Kingdom could as well become one of the most friendly countries to cryptocurrency innovation and product development.
So in simple terms, a hedge fund is an offshore investment fund, typically formed as a private limited partnership, that engages in speculation using credit or borrowed capital.
This is because the UK has just given approval for the first cryptocurrency hedge fund to operate within the jurisdiction.
Bagging this coveted position is Prime Factor Capital, a London-based hedge fund backed by BlackRock and RWE AG former executives.
The UK’s Financial Conduct Authority, the apex securities and the financial regulator said the fund will be regulated as an alternative investment fund manager and submit to European Union rules.
The guideline will see the fund having more than 100 million euros in assets under management. This is encouraging giving the total cryptocurrency market capitalization estimated at $300 billion, the approval is a big deal to the global cryptocurrency community.
“Our focus on just one asset class has allowed us to become a leader in this space and a trusted authority on crypto investing,” wrote the founders.
Under the FCA rule, the hedge fund is required to appoint a custodian under EU regulations to ensure and validate investors’ returns and the fund’s holdings.
The role of the custodian is to act independently and also provide cash flow reconciliation.
“Most vehicles for investing in cryptocurrencies are outside the scope of regulators and that’s a big problem in a market that has such a bad reputation,” said Adam Grimsley, Prime Factor’s chief operating officer.
The UK has been very friendly to cryptocurrency innovation and this latest approval will be a major boost to the UK’s digital currency community. The participation of hedge funds will also see the more participation of private and institutional investors investing in digital assets.