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U.K. Regulators Approve a Crypto Hedge Fund for First Time

U.K. Regulators Approve a Crypto Hedge Fund for First Time

(Bloomberg) -- Prime Factor Capital Ltd., a London-based hedge fund manager set up by former employees of BlackRock Inc. and RWE AG, became the first investment firm focused on cryptocurrencies to win the stamp of approval from U.K. regulators.

The company said in a July 1 statement it will be regulated as a full-scope alternative investment fund manager under European Union rules. That will allow the firm to manage more than 100 million euros ($113 million) in assets and target institutional investors, the company said.

The $300 billion market for cryptocurrencies is largely unregulated and digital assets have been used for all manner of illicit activities, from financing terrorism to buying drugs online. That has deterred regulated financial firms from entering the market.

“Most vehicles for investing in cryptocurrencies are outside the scope of regulators and that’s a big problem in a market that has such a bad reputation,” said Adam Grimsley, Prime Factor’s chief operating officer.

Grimsley, a former BlackRock fixed-income investor, set up Prime Factor in 2017 with former BlackRock colleague Michael Wong and Nic Niedermowwe, who was previously an energy derivatives trader at RWE AG.

As a full-scope alternative investment fund manager, Prime Factor is required to appoint an independent depository to provide oversight, cash flow reconciliation and safekeeping of assets, said Grimsley. Such measures provide assurances for investors that the fund’s returns and the value of the assets it holds are real and verified, he said.

To contact the reporter on this story: Alastair Marsh in London at amarsh25@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net, Patrick Henry

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