A digital-asset fund structured through Hong Kong and the CIS

A principal sitting in Almaty, Tashkent or Baku with a digital-asset strategy and a global investor base faces a question that counsel in their home jurisdiction cannot resolve: which structure actually works, and which regulator will govern the fund once assets move? The answer sits at the intersection of Hong Kong's licensing regime for virtual-asset trading platforms, the Commonwealth of Independent States (CIS – the multilateral grouping of post-Soviet states whose members include Kazakhstan, Uzbekistan, Russia, Azerbaijan and others) regulatory environment, and the practical question of where enforcement runs if something goes wrong.

A digital-asset fund structured through Hong Kong and the CIS requires decisions about licensing posture, AML obligations and entity placement across two legal environments that do not share a mutual-recognition treaty. The governing instrument on the Hong Kong side is the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), which brought centralised virtual-asset trading platforms under a mandatory licensing regime commencing 1 June 2023. The CIS side turns on the specific member state where the fund manager or investors are located – each jurisdiction has its own regulatory perimeter, and the gap between them is where enforcement risk lives.

This note describes the route we run, the decisions the client must own, and the cross-border interface that defines the engagement.

When does a foreign principal actually need this structure?

The trigger is rarely abstract. A CIS-based principal needs a Hong Kong-anchored digital-asset fund structure when one of three pressure points arrives: a lead investor insists on a regulated or recognisable jurisdiction; a Cayman or BVI fund administrator declines to take a mandate without a regulated Hong Kong entity in the chain; or an enforcement threat on the CIS side makes a neutral-forum vehicle urgent.

The enforcement-risk trigger is the one our desk sees most frequently. Assets held in a CIS jurisdiction without a Hong Kong parent or trustee entity face a concentrated risk profile – single-jurisdiction enforcement, political-economy exposure and limited recourse to common-law courts. A Hong Kong entity in the structure introduces a common-law forum, the Court of First Instance as a place to apply for interim relief, and a regulatory environment that international counterparties recognise.

There is also a secondary trigger: the fund's activities may already engage the AMLO regime without the principal realising it. Where a CIS-registered entity is routing orders through a centralised virtual-asset trading platform accessible from Hong Kong, or where a Hong Kong entity is receiving subscription proceeds denominated in digital assets, the Securities and Futures Commission (SFC) perimeter becomes relevant. Identifying the jurisdictional boundary before the structure is built is less costly than correcting it afterwards.

In our cross-border practice, we regularly advise CIS principals who arrive with an existing offshore structure – often a BVI holding company above a CIS operating entity – and need to understand whether that structure is fit for purpose as a fund vehicle, or whether a Hong Kong licensed or registered layer needs to be added.

What does the governing regulatory regime actually cover?

The AMLO mandatory licensing regime for centralised virtual-asset trading platforms (VATP licensing) makes the SFC the licensing authority for platforms that operate in Hong Kong or actively market to Hong Kong investors. The regime commenced on 1 June 2023. A digital-asset fund that operates a centralised platform, or that routes trades through one, must assess whether its activities fall within the licensed perimeter.

Where a virtual asset held by the fund qualifies as a "security" or "futures contract" under the Securities and Futures Ordinance (SFO), a separate SFC licence applies. The distinction between a utility token, a payment token and a security token is not always clear on the face of the white paper. It depends on the rights the token confers and the expectations it creates. That analysis must be done before the fund is marketed – not after the first subscription agreement is signed.

On the AML side, VATPs subject to the regime carry customer due diligence obligations and must comply with the FATF travel rule (the Financial Action Task Force's requirement that originator and beneficiary information accompanies virtual-asset transfers). For a fund with CIS investors, this means the fund manager must have a KYC programme capable of handling source-of-funds documentation from jurisdictions where banking records may be incomplete or held in non-Latin scripts. That is a practical compliance challenge, not merely a regulatory technicality.

For fiat-referenced stablecoins, the Hong Kong Monetary Authority (HKMA) has introduced a licensing regime for fiat-referenced stablecoin issuers, which commenced in 2025. Parties structuring a fund that issues or holds stablecoins should verify the current perimeter before finalising the fund documents.

The CIS side does not have a single unified digital-asset regulatory regime. Kazakhstan has introduced a framework within its Astana International Financial Centre (AIFC – a common-law financial hub established by constitutional statute, operating English-law contract rules and its own arbitration centre in Nur-Sultan). Uzbekistan has its own digital-asset licensing rules. Russia has moved in a different direction. The relevant CIS jurisdiction for a given fund depends on where the manager is regulated, where the investors are domiciled, and where the assets are custodied. Our desk works through that jurisdictional mapping at the outset.

For a discussion of how licensing and AML obligations interact with your fund's cross-border position, our Tech & Web3 practice sets out the full service range.

How does the Hong Kong and CIS cross-border interface actually work?

Hong Kong and the CIS member states share no mutual-recognition treaty for fund structures, no regulatory equivalence arrangement, and no common enforcement mechanism for civil judgments. That gap defines the structuring problem.

On the enforcement side, a judgment from a Hong Kong court against a CIS-based party – or vice versa – does not travel automatically. The enforcement route depends on whether the relevant CIS jurisdiction has entered into a bilateral treaty with Hong Kong or the PRC (which some have, in limited form), and whether the local courts of that CIS state will recognise a common-law judgment on comity grounds. The answer varies materially across the CIS. Kazakhstan's AIFC courts have a specific enforcement regime for AIFC judgments and arbitral awards. Uzbekistan's position is distinct. Russia's is again different.

The practical response is to make the Hong Kong entity the operative contracting party – the one that enters subscription agreements with investors, the one that holds the custody arrangement, and the one against which the fund's obligations run. If a dispute arises, the forum can be Hong Kong arbitration under the HKIAC Administered Arbitration Rules (the 2024 Rules, effective 1 June 2024), which gives the fund access to an award enforcement regime that has broader geographic reach than any CIS-court judgment. The New York Convention applies to Hong Kong; Hong Kong-seated HKIAC awards are enforceable in over 170 jurisdictions.

What this means structurally is that the CIS entity – whether it is the investment manager, a sub-adviser or the principal's personal holding vehicle – sits below or alongside the Hong Kong entity, not above it. The fund documentation must reflect that hierarchy clearly. Subscription agreements, management agreements and custody arrangements all need to name the Hong Kong entity as the primary obligor and forum holder.

A related question is sanctions posture. Hong Kong implements United Nations sanctions and does not give domestic effect to unilateral measures of other states. CIS investors from jurisdictions subject to unilateral sanctions measures by third states are not automatically barred from a Hong Kong-structured fund on that account. However, the fund's banking relationships and its institutional investors may have their own compliance requirements. The AML file must document the source-of-funds position for each investor, and the fund documents should include representations adequate to support the fund manager's compliance position. We frame all of this as compliance, not circumvention.

Digital-asset arrangements touching cross-border data and software agreements also raise questions that sit alongside the fund structure. Our briefing on cross-border SaaS and data agreements covers the overlapping issues for tech-enabled fund platforms.

What is the step-by-step route we run?

The engagement follows a defined sequence. Each step involves decisions that the client must own – we set out what they are and what the consequences are; the client makes the choice with the benefit of our analysis.

The first step is a jurisdictional mapping exercise. We identify which CIS jurisdictions are in scope, which entities the principal already has, and where the fund's activities will fall on the Hong Kong regulatory perimeter. This determines whether VATP licensing is required, whether an SFO licence is needed, or whether the fund can operate within the AMLO regime on a non-licensed basis because its activities do not engage the centralised-platform definition.

The second step is entity structuring. A typical structure places a Hong Kong private company or limited partnership above the CIS operating entity or manager. Where the fund will hold assets through a custodian, the custody agreement names the Hong Kong entity. The choice between a company and a limited partnership depends on the investor base, the tax position of the CIS principal, and the fund's expected life. We model the options and identify the instrument that fits.

The third step is document preparation. The core suite for a digital-asset fund typically includes: the fund constitution (articles or LPA); the private placement memorandum or information memorandum; subscription agreements; the management or advisory agreement with the CIS manager; the custody arrangement; and the AML and KYC policy documents. Locally licensed Hong Kong solicitors handle the execution of documents governed by Hong Kong law. We coordinate with those firms on the international and cross-border elements – the jurisdictional representations, the governing-law and dispute-resolution clauses, and the AML framework.

The fourth step is the regulatory engagement, if licensing is required. Where an SFC licence or a VATP licence is in scope, the application is prepared by locally licensed Hong Kong counsel. We work alongside them on the international structure elements – the group ownership diagram, the beneficial-owner disclosures and the cross-border compliance narrative.

The fifth step is the AML and KYC implementation. The fund's AML policy must be operative before the first subscription is accepted. For a CIS investor base, that means a programme that covers enhanced due diligence for politically exposed persons, source-of-funds documentation in the relevant languages, and a record-keeping structure that will satisfy the SFC or HKMA on inspection. We review the policy against the regulator's published guidelines and the FATF travel rule requirements.

The sixth step is the fund launch. At this point, locally licensed counsel handle the Companies Registry filings, the SFO or AMLO notifications, and any stamp duty considerations on the share structure. We handle the cross-border agreement execution, the investor onboarding documentation for non-Hong Kong investors, and the dispute-resolution architecture.

After launch, the engagement typically continues with annual compliance reviews and any structural adjustments triggered by changes in the regulatory environment on either side.

The sequence above describes the standard position. Your matter turns on the documents, the jurisdictions actually engaged, and the order of steps – which is where the route is won or lost. For a structured assessment of your digital-asset fund position across Hong Kong and the CIS, write to us at info@lockhartyip.com.

What documents and decisions does the client own?

A common mistake on cross-border digital-asset fund engagements is treating the legal team as the decision-maker on commercial questions. The client must own a defined set of choices, because those choices drive the entire structure.

The first decision is the investor perimeter. Will the fund accept investors from any CIS jurisdiction, or only from some? Will it accept US persons, EU retail investors, or investors from FATF grey-listed jurisdictions? Each answer changes the AML obligation, the placement memorandum, and potentially the need for a registered offering in the investor's home jurisdiction.

The second decision is the asset universe. A fund holding Bitcoin and Ether sits in a different regulatory position from one holding tokenised real-world assets or a fund-of-funds structure over other digital-asset vehicles. The token classification analysis feeds directly into the licensing question.

The third decision is the manager structure. Will the CIS-based manager act as a regulated investment manager, a non-discretionary adviser, or a carried-interest recipient only? Each structure carries different disclosure and licensing obligations on both sides of the border.

The fourth decision is the custody arrangement. Digital assets held in self-custody by the fund manager sit in a materially different risk profile from assets held by a licensed third-party custodian. Institutional investors and fund administrators increasingly require segregated third-party custody. Where custody crosses the Hong Kong–CIS boundary – for instance, where assets are held on a Cayman-registered exchange with a Hong Kong entity as the account holder – the documentation must be explicit about which entity has control and under which law.

The fifth decision is the exit and wind-down architecture. How will the fund distribute assets to investors on wind-down – in digital assets, in fiat, or both? What happens if the relevant token becomes illiquid or ceases trading on the primary exchange? The fund constitution must address these scenarios before they arise.

In our cross-border practice, we structure the engagement so the client sees these decision points before the documents are drafted. Changing the investor perimeter or the custody architecture after the PPM is circulated is disruptive and expensive.

What do foreign advisers and principals typically get wrong?

The most common error is assuming that a CIS-registered fund manager can operate a Hong Kong-fronted digital-asset fund without any licensing engagement on the Hong Kong side. That assumption is wrong in most cases. The AMLO perimeter is defined by the activities of the platform and the location of the investors, not solely by where the manager is registered. If the Hong Kong entity is doing anything more than passively holding assets – if it is receiving subscriptions, executing trades, or providing investment advice – the licensing question is live.

The second error is treating the FATF travel rule as a back-office matter. For a fund with CIS investors transferring digital assets across jurisdictions, the travel rule requires the fund to obtain, hold and transmit originator and beneficiary information for every qualifying transfer. If the fund's systems cannot capture that information for transfers originating in CIS jurisdictions – where the counterparty infrastructure may not be FATF-compliant – the fund is in breach before it has made its first investment. The AML policy must address this operationally, not just on paper.

The third error is structuring for tax only, without building the regulatory and enforcement architecture. A structure that minimises the principal's CIS tax exposure but places the Hong Kong entity in a passive, non-operative role may not survive regulatory scrutiny. Substance requirements – real decision-making, real directors, real operations in Hong Kong – are assessed by the SFC and by the HKMA in the context of licensing applications. A shell entity in Hong Kong above an active CIS manager is unlikely to satisfy those requirements.

If an earlier filing, structure or enforcement attempt has produced an adverse or stalled result, a second read can identify the strategic error and the routes still open. Contact us at info@lockhartyip.com to discuss the position.

How does this structure interact with stablecoin and custody arrangements?

A digital-asset fund that holds or issues fiat-referenced stablecoins sits in an additional regulatory layer. The HKMA's licensing regime for fiat-referenced stablecoin issuers commenced in 2025. Parties should verify the current commencement date and the perimeter of covered instruments before finalising the fund's asset policy.

The practical point is that a fund holding stablecoins as a cash-management tool – for liquidity between positions – may not itself be an "issuer" within the HKMA regime. But a fund that issues its own stablecoin to investors as the subscription instrument almost certainly is. The distinction matters for the regulatory timetable and for the documents.

On custody, our briefing on stablecoin and digital-asset custody arrangements covers the key points for funds holding digital assets through Hong Kong custodians. The custody arrangement is a critical document: it defines who controls the private keys, who has the right to instruct the custodian, and what happens if the custodian becomes insolvent or is subject to regulatory action. For a fund with CIS investors and a Hong Kong custodian, that document must be governed by a law that the investors' home jurisdiction will recognise and that the Hong Kong courts can interpret without difficulty.

A micro-scenario illustrates the interaction. A Central Asian family office with a legacy BVI holding structure above a Kazakhstan operating entity came to us in late 2026. They had agreed heads of terms with a Hong Kong VATP-licensed exchange to route the fund's trades. The existing structure had no Hong Kong entity, no AMLO compliance programme, and a subscription agreement that named the BVI vehicle as the contracting party. We restructured: a Hong Kong company was incorporated to act as the fund's contracting entity; the AML programme was built to FATF travel-rule standard; the subscription agreements were repapered under Hong Kong law with HKIAC arbitration as the dispute-resolution mechanism. The fund launched within one cycle after the restructure.

Decision matrix: situation, instrument, route and risk

The route a digital-asset fund takes through Hong Kong and the CIS depends on the combination of activities, assets and investor profile. The following is a practical read of the main positions.

Where the fund operates a centralised digital-asset trading platform and markets to Hong Kong investors, the AMLO VATP licensing regime applies. The route is SFC licensing through locally licensed Hong Kong counsel, with the international structure elements handled by our desk. The timing depends on the SFC's processing queue; parties should allow materially more time than the minimum statutory period. The enforcement risk if the fund operates unlicensed is material: the AMLO carries criminal sanctions for unlicensed operation.

Where the fund holds digital assets that qualify as securities under the SFO, the SFO licensing regime applies in addition to any AMLO obligations. The route is a Type 9 licence (asset management) or, for funds offering investment advice, a Type 4 licence. These applications run through the SFC. Our desk handles the cross-border structure narrative and the international documentation.

Where the fund's digital assets are not securities and the fund does not operate a centralised platform, the AMLO applies on the AML and KYC side but no VATP licence is required. The route is structure-and-document: a Hong Kong entity is placed in the structure, the AML programme is built to standard, and the fund documents are prepared and executed with locally licensed Hong Kong counsel. This is typically the fastest route and the one our desk sees most often for CIS-based principals at the early stage.

Where the fund includes a CIS manager regulated in an AIFC framework, the AIFC's own licensing and recognition rules apply on that side. The interface between the AIFC and Hong Kong is not based on a mutual-recognition treaty but can be managed contractually: the fund documents can provide for AIFC arbitration as an alternative forum for disputes that are better resolved in that jurisdiction, while retaining Hong Kong as the primary enforcement seat.

In every case, the AML and source-of-funds file is a constant. CIS investors require enhanced due diligence. The quality of that file determines the fund's regulatory durability and its ability to open banking relationships with reputable institutions.

Self-assessment: is your structure ready?

Before approaching counsel, a principal structuring a digital-asset fund through Hong Kong and the CIS should be able to answer the following questions. The answers drive the engagement.

• Is there an existing entity in Hong Kong, and if so, is it operative or merely incorporated?
• Which CIS jurisdictions are in scope for the manager, the investors, and the assets?
• What is the nature of the digital assets – utility tokens, payment tokens, security tokens, stablecoins, or a mix?
• Will the fund operate a trading platform, or will it route trades through a third-party licensed platform?
• Who are the beneficial owners of the fund manager, and can source-of-funds documentation be produced in a format that satisfies the AMLO standard?
• Where will custody sit – Hong Kong, the CIS, or a third-party offshore custodian?
• What is the intended investor perimeter – professional investors only, institutional only, or a wider base?
• Is there an existing dispute-resolution clause in the fund documents, and does it provide for a common-law forum?

If any of these questions cannot be answered clearly, that is the starting point for the engagement. We run the mapping exercise and identify the gaps before the structure is committed to paper.

Related practices

• Sanctions & AML – AML compliance, source-of-funds analysis and sanctions-neutral contracting for cross-border fund structures
• Holding Structures – entity placement and cross-border holding architecture through Hong Kong and offshore centres

Speak with Lockhart & Yip

For a scoped view of your matter, contact info@lockhartyip.com. Discuss your matter →

Related

• Tech Web3
• Cross Border Saas Or Data Agreement Touching Cyprus 6
• Stablecoin Or Digital Asset Custody Arrangement Briefing

This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.