Setting up your Luxembourg Crypto fund: start with the special limited partnership

A crypto fund is a managed capital of cryptocurrencies available to investors for duplication. Crypto funds serve as a connection between investors and traders in cryptocurrencies and are hoped to help them earn profits. 

Crypto funds give investors the ability to invest in a more adaptable manner in various cryptocurrencies. 

Why establish a Crypto fund in Luxembourg? 

Luxembourg is the dominating fund center in the world for cross-border funds, It is the second largest investment fund hub in the world after the U.S. and the biggest fund domicile in Europe. 

Luxembourg is a politically and financially stable EU country with a triple-A Rating. As an EU domicile, investment funds created in Luxembourg can be more easily distributed within the EU and have gained international recognition for the ease of cross-border distribution.

Which Luxembourg fund vehicle is relevant for a Crypto fund?

Luxembourg provides a range of solutions for setting up an investment fund, varying from supervised to non-supervised. A highly flexible fund vehicle that has been very successful and has proven to be a suitable choice for Crypto funds is the special limited partnership (SLP). 

The SLP is suitable for a wide range of alternative strategies such as hedge funds, private equity and real estate, crypto, etc, and benefits from being domiciled in an onshore and reputable jurisdiction.

Why the Special Limited Partnership (SLP)? 

The Luxembourg SLP generally has illiquid strategies and invests in real estate, private equity, or the debt market. It is also a highly flexible fund structure with no legal personality. The SLP is not restricted to any asset type and is not subject to any risk diversification rules. 

Benefits of the Luxembourg Special Limited Partnership (SLP) 

• It can be set up within a few weeks 
• No prior regulatory approval is required 
• Availability of an unlimited number of investors 
• The SLP can invest in any and basically all type of assets 
• No depository bank is required 
• No audit is required 
• Fully Tax transparent 

Who manages the SLP? 

The SLP must appoint a general partner (GP), generally a private limited liability company established in Luxembourg, to manage the fund on behalf of the limited partners (LPs). The SLP must have a GP, who has unlimited liability for the debts and duties of the SLP, which is the reason why the GP is generally another corporate entity offering limited liability (example, a sarl -limited liability company-). 

Furthermore, the manager of an SLP registered as an AIFM does not need to procure prior authorization from the CSSF for the Crypto Fund strategy nor does he needs to complete an application file for registration as a virtual asset service provider. 

The Special Limited Partnership can be considered the optimal solution in regard to the setup of a crypto fund in Luxembourg due to its flexibility to accommodate any kind of crypto strategy including quantitative, long only, long/short, and venture capital crypto funds, in addition to decentralized finance and security token offering fund. 

Registering a cryptocurrency fund enables you to attract funds necessary for implementing your projects. 

If you have any questions or need professional help registering your Luxembourg crypto fund, let’s go ahead and contact your Damalion expert now. 

Setting up your Luxembourg crypto fund — start with the Special Limited Partnership (SCSp)

For fund promoters, managers, family offices, and professional investors • This guide explains the SCSp option in clear steps: when it fits, documents you need, parties involved, costs and timelines. Each bank, service provider and authority makes its own decision.

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Why many crypto strategies use the SCSp

Luxembourg is a leading EU fund hub. The Special Limited Partnership (SCSp) is flexible, fast to form and works well for professional strategies: venture, long-only, long/short, market neutral, quantitative, DeFi exposure, tokenized securities, and fund-of-assets with custody at approved providers. You choose the right perimeter (unregulated AIF with registered AIFM, or under a regime like RAIF) and build a clear risk and compliance framework.

Core documents and information

• Limited Partnership Agreement (LPA) — roles of GP/LPs, strategy, fees, carry, transfers, governance, valuation, reporting.
• Offering documents — private placement memorandum or equivalent, risk factors, subscription docs, investor eligibility.
• AML/KYC pack — GP and LP identification, ownership charts, source of funds/wealth, sanctions/PEP screening.
• Service provider contracts — AIFM/portfolio manager (as applicable), administrator/transfer agent, depositary or custodian (if required by the chosen perimeter), auditor (if required), registrar.
• Policies — valuation, conflicts, side letters, liquidity, pricing of in-kind contributions, pricing of tokens, travel rule alignment (if relevant through VASP).
• Operational model — trading/custody flow, exchanges/OTC counterparties, fiat rails, wallet controls, signatory rights, key risk indicators.

SCSp paths at a glance

Topic	Unregulated AIF (SCSp) with registered AIFM	RAIF (SCSp) with authorized AIFM
Regulatory perimeter	No prior product approval; AIFM registered if under thresholds.	Product under RAIF Law; AIFM authorized; no CSSF product approval but AIFM is supervised.
Speed to market	Fast once contracts and LPA are ready.	Fast; relies on an authorized AIFM.
Diversification rules	By LPA and AIFM policy.	RAIF diversification (generally 30% rule; check current policy).
Marketing	Professional investors; national rules apply.	Professional investors; AIFMD passport via AIFM.
Typical use	Niche/early strategies; smaller AUM; quick launch.	Larger AUM; broader EU distribution via AIFM passport.

How the setup usually happens

1. Choose the path. SCSp as unregulated AIF, or RAIF (SCSp) with an authorized AIFM.
2. Build the team. GP entity, AIFM/portfolio manager, administrator/TA, depositary or custodian (as required), auditor (if required), legal counsel, paying agent, tax.
3. Draft and align. LPA, offering docs, policies, and service agreements.
4. Open accounts. Fund bank account and custody with approved providers; define wallet/signature controls.
5. Onboard investors. KYC/AML checks, subscriptions, capital calls, first close.
6. Start operations. Trade within the mandate, keep records, report to investors and authorities as required.

Costs and timelines

• Incorporation and legal drafting: depends on complexity of LPA and offering docs.
• Service providers: AIFM, admin/TA, custody or depositary (if applicable), audit (if applicable), ongoing compliance.
• Banking/custody: account opening and custody fees; on-chain controls; possible minimum balances.
• Timeline: from final drafts to first close can be a few weeks for simple files; more if structure or investor base is complex.

Related reading

• Understanding the Luxembourg SCSp
• SCSp vs SCS: key differences
• Luxembourg fund setup: SLP, RAIF, UCI Part II, SICAV/SICAF, FCP
• Crypto fund structuring services
• Investment fund: SCSp overview

Frequently asked questions

Who can invest in a Luxembourg SCSp crypto fund?

Professional or well-informed investors, as defined by the chosen regime and offering documents. Minimums and eligibility are set in the LPA/PPM and by the AIFM, where applicable.

Does the SCSp have legal personality?

No. The SCSp has no legal personality. The general partner (GP) represents and manages the partnership within the limits of the LPA and applicable law.

Is prior product authorization required?

For an unregulated AIF SCSp, no product authorization is required. For a RAIF (SCSp), the AIFM is authorized and supervised; the product is not authorized by the CSSF but must comply with the RAIF Law via the AIFM.

Is an AIFM mandatory?

Under AIFMD thresholds, a manager may operate as a registered AIFM with limits; above thresholds, an authorized AIFM is required. Check current thresholds and the marketing plan before launch.

Can the fund invest directly in tokens?

Yes, if permitted by the LPA and risk policy, and if custody, valuation, and AML controls are in place with suitable providers. Certain tokens or jurisdictions may be excluded by policy.

How are safekeeping and custody handled?

Through arrangements described in the offering docs: qualified custodians or depositaries when required by the perimeter; wallet governance, multi-signature rules, and record-keeping are defined in policies.

Are there diversification or concentration limits?

Unregulated AIF SCSp: limits are set in the LPA/AIFM policy. RAIF: diversification applies (commonly the 30% rule, subject to current guidance). Always align with the latest policy before marketing.

Can the fund use leverage?

Yes, if disclosed and controlled. The AIFM (where applicable) sets leverage limits and reporting. Financing terms must respect the LPA and risk profile.

How are valuations done for digital assets?

By a consistent policy describing pricing sources, illiquid token treatment, fork/airdrop handling, impairment, and error correction. The AIFM/manager remains responsible for fair valuation.

What AML/KYC rules apply to investors?

EU/Luxembourg AML/CFT rules apply. The GP/AIFM/administrator collects identification, ownership, source of funds/wealth, and screens investors. Transfers are permitted only as set in the LPA and AML law.

Is a depositary required?

Under certain perimeters (e.g., RAIF), a depositary is required. For unregulated AIFs below thresholds, a depositary may not be required, but custody/safekeeping arrangements remain essential.

How are marketing and passporting handled?

For RAIFs with an authorized AIFM, AIFMD passporting can be used for professional investors. For unregulated AIFs, national private placement regimes apply. Pre-marketing/marketing rules must be respected.

What tax features are typical?

The SCSp is generally tax transparent. Tax outcomes depend on investor profile, strategy and holding period. Seek specific tax advice before commitments and distributions.

Can the SCSp hold non-crypto assets?

Yes, if permitted by the LPA. Many strategies combine tokens with equity in blockchain businesses, convertibles, or cash instruments for liquidity.

How long does formation take?

With documents ready and providers aligned, formation can be completed in weeks. Timing extends with complex policies, cross-border banking, or multi-jurisdiction investor onboarding.

Are audited financial statements required?

Depending on the chosen perimeter and AUM, audit may be required or chosen by policy or investor demand. The LPA and service contracts define the audit scope and standards.

How are conflicts of interest managed?

By written policies in the LPA/PPM and the AIFM’s rules (if applicable): side letters, related-party trades, allocations, broker selection, and valuation independence.

What about sanctions and restricted counterparties?

Screening is mandatory. The fund must avoid sanctioned persons, restricted wallets, and prohibited jurisdictions, and keep evidence of checks and decisions.

Can subscriptions be paid in crypto?

Only where allowed by the LPA and service providers. Many structures accept fiat for subscriptions and move to approved custody for on-chain exposure.

Can the fund list tokens it holds?

Secondary market actions must fit the strategy, liquidity rules and insider-trading/market-abuse restrictions. Disclose the policy and keep an audit trail.