A Web3 venture capital firm wanted to invest in digital assets, but the existing ADGM position appeared to prevent it. We researched the rules, developed a new pathway and worked directly with the regulator to make the strategy possible.
CHALLENGE
The licence appeared to rule out token investments
THE WIN
A new ADGM regulatory pathway created
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Based on a real Ape Law matter. Client identities and certain details have been anonymised.
The difference
Same ambition. Two very different responses to regulation.
Without the review
Treat the initial regulatory position as the final answer
Assume the licence cannot permit token investments
Abandon the digital asset strategy
Stop the project before exploring another legitimate pathway
With the review
Understand the objective behind the regulation
Research previous decisions and available pathways
Develop a regulatory strategy around the proposed activity
Client type
Matter type
Core issue
Token investment restrictions
Main lesson
The first answer is not always final
What founders see
“The regulations do not allow it, so the project cannot move forward.”
That is how regulatory problems are often understood. A rule appears to prevent the proposed activity, the licence does not seem to cover it and the project reaches what looks like a dead end. But the first reading of a regulation does not always reveal every legitimate pathway available. The better question is whether the regulatory objective can be met in another way.
The hidden risk
A legitimate opportunity can disappear because nobody asks a better regulatory question.
Licence scope
Digital assets
Regulatory precedent
Exemption pathway
Regulator engagement
The firm wanted to invest in early-stage Web3 businesses through both equity and digital assets. At first, the regulatory position appeared to prevent the token investment part of the strategy. Accepting that initial answer would have changed the fund’s investment model or stopped the project entirely. Trying to work around the rules would have created a different problem. The firm needed a legitimate pathway that respected the regulator’s objective and supported the proposed investment strategy.
The method
Strategic Structure Review: understand the rule, then create the pathway
We did not begin with assumptions about what the regulator would accept. We started by understanding the regulatory objective, researching previous decisions and identifying a legitimate exemption pathway. We then built the strategy around that pathway and engaged directly with the regulator.
Regulatory objective
What was the regulation designed to control or protect against?
Precedent research
Had the regulator considered similar activities or alternative pathways before?
Pathway design
Could the proposed investment model operate through a legitimate exemption or different regulatory treatment?
Regulator engagement
How should the proposed pathway be presented and supported in direct discussions with the regulator?
The founder lesson
Do not assume regulation is the end of the conversation. Ask whether another legitimate pathway can be created.
Full lesson notes
The full breakdown
We worked with a Web3 venture capital firm that wanted to invest in early-stage digital asset businesses. The strategy included both traditional equity investments and investments involving Web3 tokens.
At first, the ADGM regulatory position appeared to prevent the token investment part of the strategy. The straightforward conclusion was that the licence would not allow it and the fund could not move forward as planned.
Most people would have stopped there. We did not.
The first answer appeared to be no
The existing regulatory framework did not appear to accommodate the proposed activity. Read narrowly, the position looked clear. The fund could invest in equity, but investing in Web3 tokens appeared to sit outside the permitted strategy.
That created a major problem. Removing token investments would have changed the commercial purpose of the fund. Moving forward without resolving the issue would have created unacceptable regulatory risk.
The project needed more than documents. It needed a regulatory strategy.
We asked a different question
Instead of asking how the firm could work around the regulation, we asked whether another legitimate regulatory pathway could be created.
That distinction mattered. Working around a regulation suggests avoiding its purpose. A proper regulatory strategy starts by understanding why the rule exists, what risk the regulator is addressing and whether that objective can be met through a different structure or treatment.
We researched previous decisions, examined the available framework and considered how the proposed investment activity could be presented without undermining the regulator’s objectives.
Creating the ADGM pathway
Our research identified an exemption pathway that could support the proposed investment strategy.
We developed the legal and regulatory reasoning behind it. We mapped how the firm would operate, what it wanted to invest in and how the relevant risks would be managed. We then built the regulatory strategy around that analysis.
The pathway was not a shortcut around the rules. It was a structured way of showing how the proposed activity could operate within a regulator-approved framework.
Working directly with the regulator
We engaged directly with senior members of the regulator and presented the proposed pathway.
Those discussions allowed the regulatory questions to be addressed openly. The regulator could understand the investment model, the protections around it and the reasoning supporting the proposed treatment.
The work helped create a first-of-its-kind regulatory pathway for a Web3 venture capital firm investing in tokens. What initially appeared to be the end of the project became a viable route forward.
The takeaway
Regulation is not always a simple yes or no.
A rule may appear to prevent an activity when the real issue is that the proposed pathway has not yet been fully examined or clearly presented. Good regulatory strategy begins by understanding the regulator’s objective, researching the available options and asking a better question.
Do not assume the first answer is the final answer. Sometimes the opportunity comes from understanding the regulatory pathway better than everyone else.
Where this shows up
Related services
Building an ADGM investment strategy?
The first answer may not be the only answer.
If your proposed activity appears to fall outside an existing licence or regulatory framework, a Strategic Structure Review can help examine the rules, assess legitimate pathways and prepare a strategy for regulator engagement.
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