Singapore VCC insights

VCC for digital asset and crypto funds: Common mistakes and rejection reasons

By VCC Editorial Team · Published 26 September 2026

A VCC for digital asset and crypto funds is only as strong as the licensing and custody arrangements sitting around it: the VCC Act 2018 governs the corporate vehicle, but MAS scrutinises the fund manager’s licensing position and the custody and valuation controls separately, and gaps there are the most common cause of delay or rejection. Raffles Corporate Services works with a panel of corporate and employment law firms; this article is general information, not legal advice.

What a digital asset or crypto VCC actually is

The Variable Capital Company (VCC) itself is a corporate fund vehicle under the VCC Act 2018, capable of holding one or more segregated sub-funds under sections 6, 16 and 17, with section 17A ring-fencing each sub-fund’s assets and liabilities. For a digital asset or crypto strategy, the sub-fund typically holds digital payment tokens, tokenised securities, or derivatives referencing them, directly or through a custodied wallet structure. The VCC Act does not itself regulate digital assets; that sits with the Payment Services Act and the Securities and Futures Act, administered by the Monetary Authority of Singapore (MAS), which is why sponsors must treat the VCC’s incorporation and the manager’s licensing as two separate workstreams that need to be resolved in parallel.

Who this is for

This structure suits fund managers running strategies in digital payment tokens, tokenised real-world assets, or crypto derivatives who want the segregation and variable-capital features of a VCC combined with institutional-grade custody and a licensed or exempt manager. It is not a way to avoid MAS licensing requirements: incorporating the VCC does not change what licence, if any, the manager needs to run the strategy.

The mistake that causes most rejections: assuming the VCC wrapper resolves licensing

The single most common rejection reason at the authorisation stage is an application that treats VCC incorporation as a substitute for resolving the manager’s regulatory position. A manager dealing in digital payment tokens on behalf of the fund may need to consider its position under the Payment Services Act (for token-dealing or exchange activity) and, separately, whether managing the fund itself requires a Capital Markets Services licence or fits within an applicable exemption under the Securities and Futures Act. These are manager-level considerations, not VCC-level ones, and the specific licence classes and section numbers should be confirmed directly against the current Payment Services Act and Securities and Futures Act text or with MAS-facing counsel, since incentive and licensing frameworks in this area have changed more than once. Sponsors who submit a VCC application before this analysis is settled frequently find the sub-fund authorisation held up pending evidence of the manager’s licensing status.

Numerical specifics: what reviewers expect to see

• Custody: segregated, insured cold storage or a licensed institutional custodian for the majority of digital assets, with only a working-capital allocation held in hot wallets.
• Valuation: NAV struck against an independently sourced, volume-weighted price feed from multiple venues, not a single exchange quote.
• Redemption notice: 5 to 15 business days is common, reflecting settlement and custody withdrawal timelines rather than traditional T+2 or T+3 cycles.
• Incorporation and authorisation timeline: 6 to 10 weeks where the manager’s licensing position is already settled; considerably longer where it is not.
• Insurance and audit: annual smart-contract or custody control audits are increasingly expected by administrators before onboarding a digital asset sub-fund.

Mistake two: custody and valuation controls not written into the constitution

Section 26 of the VCC Act 2018 governs constitution amendments, so custody and valuation methodology should be specified at authorisation rather than left to a side letter. Administrators reviewing a digital asset sub-fund look for a named custodian (or a documented self-custody control framework with multi-signature and hardware security module controls), a stated valuation source hierarchy for illiquid or thinly traded tokens, and a fallback mechanism for exchange outages or de-pegging events. A generic constitution copied from a traditional securities fund will not address any of this, and is a frequent reason for a return-for-revision at the administrator or authorisation stage.

Mistake three: governance gaps around private-key control

Directors owe duties under sections 156 and 157 of the Companies Act 1967 (as applied to VCCs), with section 157A allocating management powers to the board. For a digital asset fund, this extends to oversight of who controls private keys and signing authority: boards that delegate this entirely to a single individual or an unaffiliated technology vendor, without a documented multi-party control and succession framework, are increasingly flagged by administrators and institutional investors during due diligence, even where MAS itself has not raised the point directly.

Mistake four: RORC, AGM and annual return processes not adapted for a fast-moving cap table

The VCC must hold an AGM and file matters under sections 175 and 175A, lodge an annual return under section 197, and maintain a register of registrable controllers under section 119A. Crypto funds with frequent subscriptions and redemptions, and sometimes rapidly changing beneficial ownership through nominee or omnibus arrangements, need a RORC process that is actively maintained rather than updated only at year-end; regulators and administrators treat a stale RORC as a governance red flag disproportionate to its administrative nature.

Step-by-step process to avoid these mistakes

1. Resolve the manager’s licensing position under the Payment Services Act and Securities and Futures Act before submitting the VCC authorisation application.
2. Select and contractually confirm the custodian (or self-custody control framework) before drafting the constitution’s custody clause.
3. Set the valuation source hierarchy and fallback mechanism explicitly in the constitution.
4. Document board oversight of private-key control and signing authority under sections 156, 157 and 157A.
5. Build an actively maintained RORC process under section 119A that matches the fund’s actual subscription and redemption tempo.
6. Have the custodian, administrator and, where relevant, an independent security auditor review the structure before submission.

Common mistakes and rejection reasons, summarised

In descending order of frequency: (1) submitting before the manager’s PSA or SFA licensing position is settled; (2) a constitution missing custody and valuation methodology specific to digital assets; (3) undocumented private-key governance; (4) a RORC and annual-return process that lags a fast-changing cap table; and (5) underestimating how long custodian and administrator onboarding takes relative to a traditional securities fund.

FAQs

Does incorporating a VCC remove the need for the manager to be licensed?
No. VCC Act 2018 incorporation and authorisation address the fund vehicle; whether the manager needs a licence under the Payment Services Act or Securities and Futures Act is assessed separately and does not change because the fund is a VCC.

Can a VCC hold digital assets directly, or does it need a special purpose vehicle?
A VCC sub-fund can typically hold digital assets directly through a custody arrangement; a special purpose vehicle is not mandatory in the way it often is for real-asset strategies, though some managers still use one for tax or operational reasons.

What custody standard do administrators expect for a crypto VCC sub-fund?
Most expect the majority of assets in segregated, insured cold storage or with a licensed institutional custodian, with only a limited working-capital allocation in hot wallets for operational liquidity.

How is NAV calculated when token prices vary across exchanges?
A defensible approach uses an independently sourced, volume-weighted price feed drawn from multiple venues, with a documented fallback for outages or de-pegging events, set out in the constitution rather than decided ad hoc.

Why do crypto VCC sub-funds sometimes take longer to authorise than traditional funds?
Delays usually trace back to an unresolved manager licensing position or custody arrangements that were not finalised before the application was submitted, not to the VCC incorporation process itself.

Related guides

See our related guide on documents required and templates for digital asset and crypto VCCs, our guide on MAS Digital Payment Token licensing, and our guide on how IRAS treats digital payment tokens.

For authoritative guidance, see the Monetary Authority of Singapore, the Accounting and Corporate Regulatory Authority, and the Inland Revenue Authority of Singapore.

Need help with this? Call, SMS or WhatsApp +65 8501 7133, or email hello@rafflescorporateservices.com. Raffles Corporate Services works with a panel of corporate and employment law firms; this article is general information, not legal advice.

Tax treatment considerations

Crypto and digital asset VCCs pursuing the fund tax incentive schemes under sections 13O or 13U of the Income Tax Act 1947 should note that these are Income Tax Act 1947 provisions, entirely separate from VCC Act 2018 corporate-form rules, and that the qualifying conditions (fund size, local business spending and manager conditions among them) apply on an ongoing basis rather than at a single point in time. IRAS has published guidance on how digital payment tokens are treated for tax purposes generally; sponsors should confirm the current treatment for the fund’s specific token holdings and trading pattern rather than assuming parity with securities-fund treatment, since gains, income character and GST treatment can differ meaningfully for digital assets.

Cross-border and banking considerations

Crypto funds often face additional friction opening banking relationships in Singapore, given heightened anti-money laundering and countering the financing of terrorism scrutiny applied to digital-asset-linked entities. Sponsors should expect enhanced due diligence from banks and payment providers, including source-of-funds documentation tracing back through the token acquisition history, and should build this into the fund’s launch timeline rather than treating banking as a formality that follows automatically once the VCC and manager are authorised.

FAQs (continued)

Do 13O and 13U apply automatically to a crypto VCC once authorised?
No. These Income Tax Act 1947 incentive schemes have their own ongoing qualifying conditions, assessed independently of the VCC Act 2018 authorisation of the fund vehicle.

Why do crypto VCCs sometimes struggle to open a bank account?
Banks apply enhanced due diligence to digital-asset-linked entities; sponsors should prepare source-of-funds documentation for the token acquisition history well before the account-opening stage.