The hidden challenges of cross jurisdictional fund design
20 Aug 2025
Christopher Jehan, Midshore Consultancy’s managing director and owner, looks at some of the hurdles facing cryptocurrency ETFs in Guernsey
Image: andreas_prott/stock.adobe.com
Having spent more than thirty years in Guernsey’s offshore funds sector and running a consultancy firm specialising in offshore fund structuring for nearly a decade, I have considerable experience managing intricate regulatory environments. Occasionally, however, a project arises that requires completely new solutions. Jacobi’s Bitcoin exchange traded fund (ETF), Guernsey’s inaugural cryptocurrency exchange traded fund ETF, presented precisely this type of challenge.
When initially presented with this opportunity, several significant hurdles were apparent. Firstly, the Guernsey Financial Services Commission (GFSC), our local regulator, had not previously approved any cryptocurrency funds. Secondly, no ETF had ever been introduced from Guernsey. Lastly, there was uncertainty regarding whether local service providers had the interest or expertise to handle crypto-focused investment products.
Addressing these challenges required thorough planning and deliberate engagement. Initially, we held informal discussions with the regulator to determine exactly which controls would need to be established to secure authorisation. Following these exchanges, we collaborated with our client to create a detailed control framework meeting every regulatory condition identified.
Achieving authorisation for innovative funds involves more than just meeting regulatory guidelines; stakeholder relationships are equally essential. Prior to formally submitting our proposal, we engaged senior political figures to ensure that our application would receive unbiased and thoughtful evaluation. This groundwork was crucial in facilitating productive regulatory discussions and avoiding early rejection.
Managing the complexities inherent in multi-jurisdictional funds was another substantial aspect of our work. The adaptable nature of Guernsey’s regulatory system was pivotal. It enabled us to appoint a local designated administrator while delegating specialised crypto administration tasks to skilled international providers.
This structure allowed us to assemble a diverse team equipped to handle the distinctive operational demands of a cryptocurrency ETF.
Further complexities arose regarding custody arrangements and anti-money laundering (AML) regulations. Typically, open-ended funds such as ETFs require a local custodian.
However, the GFSC permitted an established international investment firm to serve as custodian for the cryptocurrency assets. In terms of AML, initial rules did not permit ETFs the same flexibility enjoyed by closed-ended funds regarding reliance on stock exchange brokers.
By referencing international guidelines from the International Organization of Securities Commissions (IOSCO), we successfully encouraged regulatory adjustments that facilitated the launch.
Throughout the project, our responsibilities extended beyond mere technical structuring. We coordinated extensively with international tax and regulatory professionals to identify and manage risks related to withholding taxes, VAT, and transfer-pricing. Concurrently, we supported the fund’s distribution by ensuring all investor materials and disclosures adhered strictly to the unique regulations of each jurisdiction involved.
Guernsey’s proactive regulatory approach, combined with Midshore’s practical expertise, was instrumental in transitioning this fund from concept to reality. Our integrated strategy — addressing regulatory, operational, and market distribution aspects — enabled Jacobi’s ETF to successfully launch and provided a robust framework for future cross-jurisdictional financial products.
Midshore’s expertise lies in effectively connecting innovative fund concepts with realistic regulatory compliance. Our methods support innovative projects to flourish even amid demanding regulatory conditions, underscoring Guernsey’s role as a supportive jurisdiction for forward-thinking financial solutions.
When initially presented with this opportunity, several significant hurdles were apparent. Firstly, the Guernsey Financial Services Commission (GFSC), our local regulator, had not previously approved any cryptocurrency funds. Secondly, no ETF had ever been introduced from Guernsey. Lastly, there was uncertainty regarding whether local service providers had the interest or expertise to handle crypto-focused investment products.
Addressing these challenges required thorough planning and deliberate engagement. Initially, we held informal discussions with the regulator to determine exactly which controls would need to be established to secure authorisation. Following these exchanges, we collaborated with our client to create a detailed control framework meeting every regulatory condition identified.
Achieving authorisation for innovative funds involves more than just meeting regulatory guidelines; stakeholder relationships are equally essential. Prior to formally submitting our proposal, we engaged senior political figures to ensure that our application would receive unbiased and thoughtful evaluation. This groundwork was crucial in facilitating productive regulatory discussions and avoiding early rejection.
Managing the complexities inherent in multi-jurisdictional funds was another substantial aspect of our work. The adaptable nature of Guernsey’s regulatory system was pivotal. It enabled us to appoint a local designated administrator while delegating specialised crypto administration tasks to skilled international providers.
This structure allowed us to assemble a diverse team equipped to handle the distinctive operational demands of a cryptocurrency ETF.
Further complexities arose regarding custody arrangements and anti-money laundering (AML) regulations. Typically, open-ended funds such as ETFs require a local custodian.
However, the GFSC permitted an established international investment firm to serve as custodian for the cryptocurrency assets. In terms of AML, initial rules did not permit ETFs the same flexibility enjoyed by closed-ended funds regarding reliance on stock exchange brokers.
By referencing international guidelines from the International Organization of Securities Commissions (IOSCO), we successfully encouraged regulatory adjustments that facilitated the launch.
Throughout the project, our responsibilities extended beyond mere technical structuring. We coordinated extensively with international tax and regulatory professionals to identify and manage risks related to withholding taxes, VAT, and transfer-pricing. Concurrently, we supported the fund’s distribution by ensuring all investor materials and disclosures adhered strictly to the unique regulations of each jurisdiction involved.
Guernsey’s proactive regulatory approach, combined with Midshore’s practical expertise, was instrumental in transitioning this fund from concept to reality. Our integrated strategy — addressing regulatory, operational, and market distribution aspects — enabled Jacobi’s ETF to successfully launch and provided a robust framework for future cross-jurisdictional financial products.
Midshore’s expertise lies in effectively connecting innovative fund concepts with realistic regulatory compliance. Our methods support innovative projects to flourish even amid demanding regulatory conditions, underscoring Guernsey’s role as a supportive jurisdiction for forward-thinking financial solutions.
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