Tokenised Fund Regulation: AIFMD and Beyond

Tokenised fund regulation is evolving fast — and getting it wrong costs more than a legal bill. Here is what every issuer needs to know before wrapping assets in a token structure.

Why Tokenised Fund Regulation Matters Now

Capital markets are moving on-chain at pace, but regulation has not stood still. In the European Economic Area, any pooled vehicle that raises capital from multiple investors and invests according to a defined policy is almost certainly an Alternative Investment Fund under the Alternative Investment Fund Managers Directive — AIFMD. That classification does not disappear because you issue participation rights as tokens rather than paper certificates. Regulators in Germany, Luxembourg, and Austria have each confirmed this position in guidance or supervisory letters since 2021. For issuers, the practical consequence is clear: the token is a wrapper, not a workaround. Understanding which regulatory layer governs your structure from day one prevents costly restructuring later and protects investors — a fact that sophisticated LPs increasingly verify during due diligence.

AIFMD in a Tokenised Context: What Changes, What Does Not

AIFMD sets requirements for the manager — the AIFM — not directly for the fund vehicle itself. If your fund is below the de minimis threshold (€100 million leveraged, €500 million unleveraged), a full AIFM licence is not mandatory, though registration with a national competent authority still is. Above those thresholds, you need an authorised AIFM, an approved depositary, annual audited accounts, and an investor disclosure document. Tokenisation touches several of these obligations in practice: depositary rules must account for digital-asset custody arrangements; the offering document must describe both the investment strategy and the token mechanics; and ongoing reporting obligations remain unchanged. AIFMD II, which Member States must transpose by April 2026, introduces tighter delegation and liquidity-management rules that will directly affect on-chain fund structures seeking EU marketing passports.

MiCA: The Missing Piece for Token-Specific Rules

The Markets in Crypto-Assets Regulation became fully applicable in December 2024. MiCA does not replace AIFMD — the two regimes interact. Fund tokens that qualify as financial instruments under MiFID II fall outside MiCA's scope entirely, sitting instead under securities law. However, hybrid structures — for example, a feeder vehicle that issues a utility-style token alongside equity-linked participation rights — can straddle both regimes, creating dual compliance obligations. For stablecoin-denominated subscriptions and redemptions, MiCA's e-money token and asset-referenced token rules become directly relevant to settlement mechanics. Issuers should seek a formal classification opinion before structuring, because misclassification under MiCA carries administrative fines of up to €5 million or 3% of annual turnover, whichever is higher — a material risk for any early-stage fund.

The Liechtenstein TVTG Advantage for Fund Issuers

Liechtenstein's Token and Trusted Technology Service Provider Act — the TVTG — came into force in January 2020 and remains one of the most comprehensive token-specific legal frameworks globally. It establishes a clear civil-law basis for rights transferred via tokens, including fund participation rights, which resolves a key uncertainty that persists in several larger EU jurisdictions. Issuers registered and issuing under the TVTG benefit from legal certainty on token ownership, transfer mechanics, and — critically — the enforceability of investor rights without requiring a parallel paper register. Liechtenstein is also an EEA member, so AIFMD and MiFID II apply in full, making TVTG-based issuances passportable across EEA markets when the relevant conditions are met. Investhub operates within this framework, supporting issuers in structuring compliant token issuances from day one.

Structuring the Fund Wrapper: Practical Compliance Checkpoints

Before a token goes live, issuers should work through five core compliance checkpoints. First, asset classification: is the underlying a loan, equity share, profit participation right, or something else? Each carries different prospectus and disclosure obligations. Second, investor eligibility: are you targeting professional investors only, semi-professional, or retail? Retail access triggers the most demanding disclosure requirements under both AIFMD and the Prospectus Regulation. Third, depositary and custody: who safeguards the underlying assets and the token registry? Fourth, AML/KYC: every subscription must pass through appropriate checks regardless of how the token is transferred. Fifth, secondary-market liquidity: operating an internal bulletin board for token transfers is materially different from running a regulated trading venue — the boundary matters and must be documented. Each checkpoint involves genuine legal and operational risk; addressing them early lowers total compliance cost.

Secondary-Market Liquidity and the Regulated Bulletin Board Model

One of the most commercially sensitive questions for tokenised fund issuers is liquidity: how do investors exit before the fund's natural maturity? Operating a full multilateral trading facility requires an MTF licence — a significant undertaking. A lightly regulated bulletin board, where buyers and sellers are matched on a non-discretionary basis without the platform taking proprietary risk, sits in a different category under MiFID II. Getting this distinction right protects both issuer and investor. Investhub's secondary bulletin board is designed with this regulatory boundary in mind, offering a transparent mechanism for token transfers without crossing into activities that require an MTF or OTF licence. Issuers should nonetheless ensure that any secondary-market arrangement is disclosed in the offering document and that token transferability does not inadvertently trigger open-ended fund classification under AIFMD.

Stablecoin Settlement: Efficiency Gains and the Regulatory Overlay

Settling fund subscriptions and redemptions in stablecoins offers genuine efficiency benefits: faster clearing, programmable distribution waterfalls, and reduced FX friction for cross-border investors. Under MiCA, however, the stablecoin used must itself be a compliant e-money token or asset-referenced token issued by a supervised entity. Using a non-compliant stablecoin for settlement could expose both issuer and service provider to regulatory censure. Due diligence on the stablecoin's regulatory status is therefore part of fund structuring, not an afterthought. Investhub supports stablecoin-denominated settlement as part of its issuance infrastructure, working with instruments that satisfy MiCA's requirements. For issuers, this means the efficiency benefits of on-chain settlement are accessible without inadvertently taking on unquantified regulatory exposure from the settlement layer itself.

Tokenised fund regulation is not a barrier to capital efficiency — it is the foundation that makes institutional-grade tokenisation viable. Issuers who invest in getting the structure right from day one spend less on remediation, close faster, and attract more sophisticated capital. Investhub is built for exactly this: compliant token issuance under the TVTG, integrated AML/KYC, secondary-market infrastructure, and stablecoin settlement — in one platform. If you are structuring a tokenised fund and want regulatory clarity before you commit to a structure, speak to the Investhub team.