And never breathe a word about your loss”
While private funds might not be bound by 22-e, working to establish a Best Practices approach would suggest that every measure must be taken to anticipate the problems and subsequent solutions that could exist for funds operating in the Cryptocurrency space. Is it possible to pay-out in kind? Is there a plan in case this is necessary? Are you employing third-party administrators?
“The mind of a wise man is the safest custody of secrets.” ~ Ali ibn Abi Talib
That might ring true philosophically, but what are you going to do from a practical stand when you have to have a process by which those private keys are held by a custodian and/or custodial process for safekeeping… can they be insured for loss? Can you utilize a trust company? Surprisingly, there IS a US trust company that is developing best practices for digital currency, holding them for institutions and individuals and IRAs alike (since IRS Notice 2014-2). There are limitations to the types of digital currencies they can custody, but there are becoming traditional solutions for this industry that are actually shocking when you think about how neophyte it remains. Sadly, the options are few and practically, I’m not sure that they are satisfactory for the broad and increasingly complicated needs that these new funds possess/will possess.
Eric Jacobs is Managing Member of Essential Fund Services Inc. and has spent more than a quarter century working in the financial services industry. Mr. Jacobs is the founder and former portfolio manager for Miller & Jacobs Capital LLC, a formerly $850 million Asset Management Firm specializing in alternative hedge fund’s (such as the Acadia Fund) as well as traditional, mutual fund products, structured, asset backed products and consulting in the financial services industry.