Cyprus marked a significant milestone in the cryptocurrency investment landscape with the launch of ARK36 in October, the country’s first actively-managed investment fund specifically targeting the cryptocurrency markets. Based in Larnaca, ARK36 focuses on providing professional investors with a risk-adjusted exposure to crypto-assets. It operates under the regulatory framework of an Alternative Investment Fund with Limited Number of Persons (AIFLNP) and is overseen by the Cyprus Securities and Exchange Commission (CySEC).
As the global cryptocurrency market has surged from a market capitalization of just USD 17 billion in early 2017 to over USD 200 billion at the beginning of 2020, ARK36 aims to capitalize on this substantial growth. Its unique positioning as an AIFLNP solely dedicated to cryptocurrency investments means that investors seeking to diversify their portfolios will not experience overlap with other asset classes.
Ulrik Lykke, co-founder of ARK36, expressed excitement about offering digital asset investment services that bridge the gap between traditional investments and the rapidly expanding cryptocurrency market. He also highlighted Cyprus’ strong reputation in fund management, its financial industry tradition, and a robust private sector as factors contributing to the decision to establish the fund in the country.
While Cyprus does not currently possess a comprehensive legal framework for regulating blockchain and cryptocurrencies, the government has taken proactive steps in this direction. A working group has been formed to develop and implement blockchain technology and has outlined a national strategy that includes a legal framework for regulating cryptocurrencies and cryptocurrency trading. This framework is expected to categorize cryptocurrencies into “security tokens” and “non-security tokens.”
Presently, businesses engaged in activities related to blockchain or cryptocurrencies in Cyprus are subject to existing regulatory provisions to the extent that their activities align with these regulations. Initial Coin Offerings (ICOs), a popular fundraising method, often involve cryptocurrencies and can be facilitated effectively in Cyprus through AIFLNPs due to their flexibility and absence of diversification requirements.
George Ayiomamitis, Managing Director of Sovereign Trust (Cyprus), emphasized Cyprus’ rapid emergence as a leading investment fund center in Europe, driven by continuous efforts to enhance its legislative and regulatory environment. The launch of this cryptocurrency hedge fund underscores Cyprus’ commitment to staying at the forefront of industry developments and positions it as an attractive destination for international fund promoters and investors seeking secure and advantageous fund solutions.