Structuring a Tokenized Fund in El Salvador

DefinitionPlain English

1) What a Tokenized Fund Is (Under Real Legal Structures)

Token is a “rights wrapper”

Investors do not buy “a blockchain”. They buy fund rights represented by a token.
Rights must exist off-chain: subscription, ownership/economic rights, redemption, distributions, information rights.
The token is the transfer tool; the legal docs are the enforceability engine.

What makes it bankable / investable

Clear fund vehicle (or SPV) holding the portfolio assets.
Valuation logic (NAV), pricing, redemption/lock-ups, reporting cadence.
Transfer controls + investor eligibility and cross-border distribution discipline.

Key idea: If token-holder rights cannot be enforced in a dispute, your “fund” is just a marketing claim. We structure enforceability first, and only then align token mechanics.

StructurePick a model

2) Structuring Options for Tokenized Funds

Model A: SPV / fund vehicle + tokenized participation

Vehicle holds portfolio assets (RWA, loans, treasuries, yield strategies).
Token represents participation rights (economic + limited governance).
Best when you want clean segregation and predictable investor protections.

Model B: Feeder structure (tokenized feeder → main vehicle)

Tokenized vehicle aggregates subscriptions and invests into a main fund or strategy.
Useful when you need separate distribution rules per investor geography.
Good for cross-border compliance and controlled onboarding pathways.

Model C: Revenue participation (cashflow token)

Token is a contractual claim to defined cashflows (not “fund ownership”).
Often simpler for certain yield products and structured notes.
Docs focus: waterfall, reporting, reserve rules, default & remedies.

Model D: Debt-like (tokenized note / instrument)

Token mirrors a repayment obligation with covenants and default triggers.
Best for fixed-income style products or asset-backed lending pools.
Docs focus: covenants, collateral logic, enforcement path, disclosures.

We choose the model by facts: target investors, whether you offer redemption, liquidity expectations, custody model, and whether secondary trading is planned.

RightsInvestor-grade

3) Token-Holder Rights (What Must Be Defined)

Economic rights

NAV / pricing method and valuation sources
Distributions: frequency, waterfall, reserves
Fees: management, performance, platform/service fees
Redemption: gates, lock-ups, suspension triggers

Governance & protections

Conflicts policy and related-party controls
Manager powers, limits, and reporting duties
Audit / verification options (especially for RWA)
Dispute resolution, evidence, and enforcement mechanics

Common failure: A “whitepaper” that promises yield without legal obligations, controls, and an enforcement path. For funds, disclosure discipline is not optional.

CompliancePerimeter

4) Licensing Perimeter: Issuer vs Regulated Services

Issuer role (typical)

Issues tokens representing fund rights.
Maintains disclosure, governance, reporting, and investor communications.
Implements onboarding and transfer restrictions aligned with distribution rules.

Service-provider triggers (where risk spikes)

Custody of client assets or keys (including “we hold wallets for investors”).
Operating exchange/secondary venue or facilitating matching.
Brokerage/placement/marketing as a service.
Managing third-party client funds beyond the issuer perimeter.

Our approach: map roles first → structure documents → then implement smart contract + platform mechanics. This avoids “accidental licensing”.

DistributionCross-border

5) Distribution Model (Private/Public + Investor Geography)

A tokenized fund becomes risky when distribution is treated as “global by default”. The offering model should define who can buy, from where, under what onboarding logic, and what resale restrictions apply.

What we design into the structure

Investor eligibility gating (retail vs professional where relevant)
Jurisdiction restrictions (US/EU/UK and others, depending on facts)
Marketing rules and disclaimer posture
Transfer controls and controlled resale mechanics

What typically breaks the deal

Public marketing that unintentionally turns the deal into a public offering
“Secondary liquidity” promises without a legal/operational venue plan
Yield claims that do not match enforceable obligations
No KYC/AML baseline, weak recordkeeping, unclear investor registry

Rule: A token can move globally. Your legal obligations move with it. Distribution controls are not “extra”—they are core.

OperationsFund-grade

6) Fund Operations: What Must Exist Beyond the Token

Valuation & reporting

NAV methodology and valuation sources (especially for RWA)
Reporting cadence (monthly/quarterly), disclosure updates
Asset verification evidence: registries, appraisals, statements

Custody & controls

Custody model (self-custody vs institutional custody)
Wallet loss / incident handling policy
Transfer restrictions and investor registry integrity

Governance & risk

Conflicts policy and approvals
Investment limits, prohibited assets, concentration rules
Risk disclosures tied to strategy (credit, liquidity, counterparties)

Cashflow mechanics

Waterfall rules for yields and fees
Reserve accounts and redemption buffers
Audit / verification options for revenue streams

If you want investors to treat it as a fund, you need fund-grade operations—even if the investor interface is a token.

TimelineTypical

7) Typical Timeline (Tokenized Fund Structuring)

1

Scoping & model choice (Week 1)
Strategy, investor type, distribution plan, custody assumptions, and the chosen structuring model.
2

Vehicle + rights mapping (Weeks 1–3)
Fund/SPV architecture, token-holder rights, governance, fees, redemption logic, disclosure outline.
3

Legal pack drafting (Weeks 2–6)
Offering terms, token-holder agreements, risk factors, conflicts policy, reporting & valuation framework.
4

Compliance + operational controls (Weeks 4–8)
KYC/AML onboarding, investor restrictions, custody/transfer controls, registry integrity, incident handling.
5

Launch readiness (Weeks 6–12)
Final review, launch sequencing, reporting cadence, investor comms, and post-launch obligations mapping.

Timeline depends on asset type (RWA vs liquid), investor geography, and whether secondary trading is planned.

FAQTokenized funds

8) Frequently Asked Questions

Is a tokenized fund the same as an investment fund license?

Not automatically. A tokenized fund is a structure where fund rights are represented by a token. The licensing perimeter depends on the activities you perform (issuer vs custody/exchange/brokerage/placement), the distribution model, and investor base.

Can we offer redemption (buybacks) to token holders?

Yes, but redemption requires clear rules: lock-ups, gates, suspension triggers, pricing/NAV method, and operational capacity to process redemptions. We design this as a fund-grade mechanic, not a marketing promise.

Do we need an SPV / vehicle, or can we just issue tokens?

In most investment-grade cases you need a legal wrapper to hold assets, segregate risk, and create enforceable rights. Pure “token-only” offerings are where enforceability and investor protection often collapse.

Can we market to investors outside El Salvador?

Often possible, but cross-border distribution is where compliance risk concentrates. We implement investor restrictions, marketing rules, and transfer controls aligned with target jurisdictions.

Need a defensible tokenized fund structure in El Salvador?

We build the legal core: vehicle + enforceable token-holder rights, disclosure discipline, distribution controls, custody/transfer architecture, and a practical regulatory pathway plan.

Legal Opinion for Token Issuance Tokenization Structuring in El Salvador Read: How tokenization works under El Salvador law

Disclaimer: This page is general information and not legal advice. Requirements depend on asset facts, offering type, investor geography, and the services you plan to provide.