The digital asset investment landscape has matured rapidly, evolving from speculative venture bets to sophisticated institutional allocation strategies. As pension funds, endowments, and family offices increasingly seek crypto exposure, fund managers face complex challenges around regulatory compliance, operational infrastructure, and investor expectations.

We spoke with Samuel Roh, Partner in Alston & Bird's Investment Funds Group, about the current state of crypto fund formation and what it takes to attract institutional capital in this space. Samuel joined the leading international law firm from Kirkland & Ellis in November 2024, bringing extensive experience in structuring venture capital, private equity, and hedge funds. Based in Alston & Bird's New York office, he advises clients on the full spectrum of private investment fund formation and operational matters.

1. Structuring Crypto-Focused Investment Funds in the Current Regulatory Environment

As someone with extensive experience forming venture capital, private equity, and hedge funds, how are you advising clients on structuring investment funds that focus on digital assets and blockchain investments? With the evolving regulatory landscape—from SEC enforcement actions to potential new crypto regulations—what structural considerations are most critical when forming funds that will invest in crypto assets, crypto companies, or DeFi protocols?

The current regulatory environment for digital assets and blockchain investments remains one of the most actively evolving areas in finance, and effective fund structuring in this space requires a combination of flexibility and foresight—building an architecture that complies with today's rules while anticipating the impact of developing legal and regulatory guidance and enforcement priorities.

One of the primary challenges in holding digital assets and blockchain investments is that their regulatory classification can change midstream, altering how such investments should be managed, custodied, or disclosed. To address these issues, we suggest contingency mechanisms for our client funds, typically with oversight from the fund's investor advisory committee, to allow for rapid adaptation to regulatory changes. Examples include transferring an affected asset into a "side pocket" or special purpose vehicle, adjusting exposure limits, or imposing trading restrictions—all without the delay and burdens of a full fund restructuring or investor consent process.

Such structural decisions work best when paired with robust governance. Well-drafted documents and clearly defined investor advisory committee processes help ensure that decisions will be made and communicated effectively as the legal and regulatory environment evolves, while tailored reporting and side letter arrangements further align fund operations with limited partner priorities. In an asset class defined by regulatory uncertainty, transparency and disciplined flexibility give investors confidence that the fund can adapt while maintaining consistency with its investment mandate.

2. Institutional Capital Allocation to Digital Assets

You recently joined Alston & Bird from Kirkland & Ellis, bringing deep expertise in alternative investment strategies. How has institutional investor appetite for crypto exposure evolved, and what are the key due diligence and compliance concerns you're seeing from pension funds, endowments, and family offices looking to allocate capital to digital assets? How do you structure these arrangements to satisfy both institutional investor requirements and fund operational needs in the crypto space?

Appetite for digital assets and blockchain investments from institutional investors has grown markedly in the last several years. What may have begun as small, speculative "venture bets" on a new technology has evolved into deliberate allocation within alternative investment strategies. For pension plans, endowments, and large family offices, exposure to digital assets today is considered a way to access less-correlated returns, participate in the growth of new asset infrastructure, and, for some investors, hedge against inflation.

This shift in perspective has raised the bar for due diligence, and institutional investors no longer limit their review of a fund manager to just its track record. Their diligence now extends into areas particular to digital assets and blockchain investments, such as custody and key management, detailed assessment of a manager's AML/KYC and sanctions compliance processes, among others. In parallel, these heightened expectations are also influencing how managers structure investment exposure, as investors increasingly demand greater control and transparency. For example, managed account arrangements are being used to provide investors the ability to set specific limitations on risk exposures, counterparties, and custody arrangements. Moreover, co-investment platforms are emerging, allowing institutional investors to obtain direct exposure to certain cryptocurrencies or equity investments alongside the main fund, and hybrid funds are common, combining liquid strategies with private equity-style investments.

All of the above are underpinned by a significant rise in operational standards. Institutional allocators today expect digital asset fund managers to operate with the same infrastructure they demand from other alternative asset classes, such as reputable fund administrators, independent valuation committees, and segregated custody with institutional-grade custodians.

Managers that are able to deliver this level of operational rigor are the ones attracting long-term institutional capital as digital assets mature into a more mainstream asset class.

3. Operational Challenges for Crypto Investment Vehicles

Given your experience with managed accounts, revenue-sharing agreements, and fund operational matters, what unique operational and legal challenges arise when managing investment vehicles focused on digital assets? How do you address issues like crypto custody, valuation methodologies for illiquid tokens, tax reporting for complex DeFi strategies, and compliance with traditional fund regulations when the underlying assets operate in a largely unregulated or nascent regulatory environment?

Operating a digital asset fund introduces distinct challenges that go well beyond those of traditional funds, requiring infrastructure and expertise that extend beyond standard fund operations, touching every aspect of custody, valuation, accounting, compliance, and technology.

Custody and security of digital assets are among the most important concerns for investors, and digital asset managers have moved past relying solely on cold-storage solutions and now employ multi-custodian arrangements, qualified custodians, multi-signature and MPC protocols, and strict segregation of keys across trading, staking, and protocol governance functions. These frameworks are designed with institutional standards in mind, often backed by appropriate insurance coverage, regulatory compliance, and operational resilience planning.

Valuation is another area where traditional methods require adaptation. Many crypto assets and blockchain investments trade in thin markets, making price discovery challenging, and managers should combine data from multiple sources, apply liquidity discounts, and incorporate fundamental analyses such as protocol cash flows, tokenomics, and network usage metrics. Independent valuation committees should oversee these methodologies to ensure consistency and credibility.

Additionally, tax and accounting implications of digital asset and blockchain investment strategies are more complex than those of traditional assets. Staking rewards, airdrops, and multi-step DeFi transactions can each create tax issues that must be handled with precision. Beyond blockchain-native accounting platforms that provide real-time tracking and compliant reporting, most managers now retain accounting and tax advisory firms with deep crypto expertise, as these firms can help interpret IRS guidance, reconcile on-chain activity with traditional ledgers, and ensure compliance across relevant jurisdictions.

Even as a less regulated asset class, digital asset funds remain subject to core fiduciary obligations. Managers should back these controls with independent audits, structured investor reporting, and periodic compliance certifications to reassure investors that fiduciary standards are being upheld.

For crypto fund managers, getting these operational foundations right is not optional—custody protocols, valuation processes, tax and audit expertise, and compliance systems collectively form the core of an institutional-grade platform. As the asset class matures, these operational foundations will increasingly define which managers earn investor trust.