In a recent episode of the podcast, host Ian Andrews invited Henry Arslanian, co-founder and managing partner of Nine Blocks Capital Management. Arslanian co- Discussed the regulatory environment, challenges and opportunities faced by cryptocurrency hedge funds. He also shared his experience in the process of obtaining a Dubai Virtual Asset Regulatory Authority (VARA) license, as well as his views on the challenges and opportunities faced by crypto asset managers during the market downturn. insights. The following is a summary of the main content:
Dubai as a pioneer in cryptocurrency regulation
Dubai has been working hard in recent years to establish a cryptocurrency regulatory environment that is both strict and supportive of innovation, attracting financial services companies from around the world. Arslanian said that compared with the 60-70 license applications he has handled in the past, VARA's application process is by far the most difficult, and its ongoing supervision is also the most stringent. As the first licensed crypto hedge fund in Dubai, Nine Blocks Management is required to submit weekly and monthly reports to regulators reporting its financial status and trading activities, demonstrating Dubai's strict standards in cryptocurrency regulation.
Aiying added:
Dubai VARA license application steps involved Multiple levels, including but not limited to:
Detailed business plan submission: Applicants need to submit a detailed business plan describing their business model and risk management Strategies, technical architecture and how to meet anti-money laundering (AML) and counter-terrorism financing (CFT) compliance requirements.
Financial and operational transparency: VARA is required to demonstrate its financial health and operational transparency, including but not limited to capital reserves, investment strategies and internal control processes.
Compliance and security review: Crypto hedge funds must pass VARA’s compliance and security review, including the security of technology platforms and data protection measures and the ability to follow international best practices.
Ongoing regulatory requirements:
Once licensed, Nine Blocks management is required to comply with VARA's ongoing regulatory requirements to ensure continued transparency and compliance in its operations. These requirements include:
Periodic reporting: VARA is required to report regularly on its operations, including weekly and monthly reports, covering financial conditions, investment activities and any significant changes .
Compliance audit: Receive regular compliance audits, including the effectiveness of anti-money laundering measures, protection of investor funds, and market conduct regulations.
Risk management report: Submit a risk management report to show how the fund identifies, evaluates and manages various risks in the investment process to ensure that the risks are within control.
This level of regulatory requirements, while creating additional operational burdens, also provides investors with a higher level of protection while improving cryptography Hedge fund credibility and transparency in global financial markets.
Challenges and opportunities during market downturns
Arslanian shares Learn how crypto asset managers are responding to challenges during market downturns through adaptive strategies and risk management. He noted that while market volatility creates uncertainty, it also provides funds with the possibility to take advantage of different investment opportunities during market downturns. Through strategies such as diversifying the investment portfolio and using stablecoin hedging, Nine Blocks management is able to maintain stable performance in adverse market environments.
Challenges
Falling investor confidence: Arslanian mentioned , a major challenge during a market downturn is maintaining and restoring investor confidence. Nine Blocks addresses the challenge by increasing the frequency of communication with investors and providing transparency into market analysis and fund performance, ensuring investors maintain a long-term perspective.
Asset value volatility: Market downturns are often accompanied by high volatility, which for crypto hedge funds means rapid changes in asset values. Arslanian highlighted their use of advanced risk management tools and strategies to mitigate the effects of volatility, such as by diversifying their portfolios and hedging with stablecoins.
Liquidity dries up: In the interview, Arslanian also mentioned the problem of reduced liquidity during market downturns. Nine Blocks addresses liquidity challenges by allocating funds and executing trades across multiple trading platforms, as well as leveraging liquidity pools in the DeFi ecosystem.
Opportunities
Value discovery: Arslanian points out that market downturn Periods provide opportunities to discover and invest in undervalued assets. Nine Blocks takes a proactive research approach to identify assets that have strong fundamentals but are affected by market sentiment, in anticipation of gains when the market recovers.
DeFi’s innovative revenue opportunities: Although DeFi brings new risks, Arslanian emphasized that it also provides innovative ways to obtain revenue. Nine Blocks actively explores DeFi protocols, uses mechanisms such as lending and liquidity mining to obtain additional income, and at the same time takes measures to manage related smart contract and protocol risks.
Stablecoins as risk management tools: During times of market instability, Arslanian described how stablecoins have become a key tool for Nine Blocks to manage risk and maintain asset liquidity. They reduce the impact of market fluctuations by allocating stablecoins in their investment portfolios, and use stablecoins to seek income opportunities in DeFi projects.
The future of crypto hedge funds
When talking about When discussing the future of crypto hedge funds, Arslanian highlighted the growing role of stablecoins and decentralized finance (DeFi) in the industry. He predicted that as more traditional financial practices are introduced into the crypto space and the regulatory environment gradually matures, crypto hedge funds will continue to grow, providing investors with more opportunities and protections. In addition, he also emphasized Dubai’s role as a pioneer in global cryptocurrency regulation. As the cryptocurrency market continues to mature and the regulatory environment becomes increasingly sophisticated, crypto asset managers will face new opportunities and challenges.
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