The Guernsey Financial Services Commission has published an overview of its approach to cryptocurrency funds, setting out how it will assess applications and the safeguards it expects where funds have crypto exposure. The Commission indicates it can support collective investment schemes offering indirect cryptocurrency exposure when investors are properly informed of the risks and able to bear potential losses, while maintaining a cautious stance on Virtual Asset Service Providers (VASPs), including retail exchange services. The application assessment factors highlighted include the track record, experience and resources of the business, detailed risk warnings where non-institutional or professional investors are targeted, a clear business model, and appropriate cyber security and operational controls. For funds with crypto exposure, expectations include mechanisms to ensure retail investors have received professional advice and do not commit more than they can afford to lose, confirmation of the regulated status of key service providers (including any custodian), and detailed treatment in the Business Risk Assessment covering compliance monitoring plans, testing and risk management processes. These sit alongside standard mitigants for regulated funds such as fund board oversight, administration by a licensed fund administrator and disclosure. The Commission notes that its staff will engage with firms considering innovative structures or prospective applications, with further material referenced on the Commission’s Innovations webpage.

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