Understanding the Singapore VCC
The Variable Capital Company (VCC) is a fund structure in Singapore designed to optimize fund management by allowing multiple investment funds to operate under a single legal entity.
The VCC structure was launched in 2020 by the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA). It has positioned Singapore as a leading global fund domicile, offering significant benefits in fund administration, tax efficiency, and investor access.
Read more: What is the VCC Structure? A Complete Guide for Fund Managers
Tokenization of the VCC Structure
One of the most exciting developments in the Singapore VCC ecosystem is the rise of blockchain-powered VCC funds.
For the VCC structure to meet the future needs of investment managers, investors, and service providers and compete sustainably with similar legal structures in other popular fund jurisdictions such as Cayman, Delaware and BVI, it needs to enable tokenization capability to offer more operational benefits to the VCC fund’s stakeholders.
Tokenization of fund interests not only allows fund managers to access a new distribution channel powered by distributed ledger technology (DLT) that offers tradability of private market assets but also offers increased efficiencies and cost savings for lifecycle management of parent fund and sub-funds.
Project e-VCC: Singapore’s First Tokenized VCC
Project e-VCC, led by InvestaX and joined by UBS, StateStreet, CMS, PwC and the Tezos Foundation, was Singapore’s first live PoC for a blockchain-native VCC fund.
This PoC explored how VCC fund shares could be issued directly on blockchain, leveraging both public (Tezos) and private (STACS) blockchains.
The study identified four major benefits of tokenized VCCs:
- Blockchain-native fund shares eliminate intermediaries, reducing administrative costs and processing times.
- Secondary market trading enables liquidity for previously illiquid private fund investments.
- Automated fund operations streamline governance, making fund administration faster and more transparent.
- Singapore’s VCC framework is well-suited for tokenized securities, enabling seamless digital asset issuance and compliance.
Project e-VCC evaluated two approaches to tokenizing VCC fund shares: One-Tier vs. Two-Tier VCC Tokenization. See a side-by-side comparison of the two VCC tokenization models below.
The one-tier model offers greater efficiency and investor transparency, but requires clear regulatory frameworks to enable full-scale adoption.
For more information, please read more about Project e-VCC and download the Project e-VCC Report.
Benefits of Tokenized Variable Capital Companies (VCCs)
1. Enhancing Liquidity in Traditionally Illiquid Markets
Historically, private market funds such as private equity, venture capital, and real estate funds have been highly illiquid, requiring long lock-up periods and complex exit strategies. Tokenization transforms VCC fund shares into digital securities, allowing investors to:
- Trade fund shares on regulated secondary markets
- Exit investments without lengthy redemption processes
- Attract a broader range of investors, including smaller accredited investors
Example:
A traditional private equity investor might need to hold their investment for 7-10 years before exiting. With a tokenized VCC, that investor could sell fund shares on a regulated digital exchange in a fraction of the time.
2. Reducing Operational Inefficiencies & Costs
Fund administration today is manual, paper-intensive, and prone to delays. Blockchain automates and streamlines fund operations, enabling:
- Automated investor onboarding with on-chain KYC/AML verification
- Smart contract execution for share issuance and redemptions
- Real-time, transparent fund reporting for investors and regulators
- Faster settlement times, reducing intermediary costs
A blockchain-native VCC eliminates many redundant processes, driving cost savings for fund managers while improving investor experience.
3. Expanding Investor Access with Fractional Ownership
Traditionally, investing in private market funds requires high minimum capital commitments. Tokenization enables fractional ownership, allowing:
- A broader range of institutional and accredited investors to participate
- Lower minimum investments, making VCCs more accessible
- Easier portfolio diversification across multiple funds
By tokenizing VCC fund shares, fund managers can unlock new capital pools and attract a more diverse investor base.
How Fund Managers Can Tokenize a VCC
Step 1: Structuring the Tokenized VCC
Fund managers decide:
- Standalone or Umbrella VCC?
- Open-ended or closed-ended structure?
- Public blockchain or private blockchain?
Step 2: Primary Issuance and Distribution of tokenized e-VCC Fund
- Fund shares are issued as security tokens on blockchain.
- Fund managers can distribute the tokenized fund on a licensed and regulated platform like InvestaX.
- Investors undergo on-chain KYC/AML verification.
- Investors receive digital securities in their wallets, replacing traditional share certificates.
Step 3: Enabling Secondary Market Trading
- Fund managers list tokens on a licensed digital securities exchange (such as InvestaX)
- Investors can list and allow for trading of fund shares peer-to-peer or with institutional buyers
- Transactions settle instantly or near-instantly, increasing liquidity
Step 4: Managing Lifecycle Events Digitally
- Smart contracts automate dividend distributions
- Tokenized voting rights enhance investor governance
- Fund redemptions and exits are managed seamlessly on-chain
Frequently Asked Questions about Tokenizing VCCs
1. What is the potential capital raise for a tokenized VCC?
The amount that can be raised depends on the fund manager’s track record in similar investment themes. Additionally, factors such as target returns, investment period, and exit flexibility influence the ideal size for the initial fundraising round.
2. To what extent does an e-vcc platform cover the functions of the life-cycle management?
The e-vcc portal is meant to facilitate fund managers to manage their tokenized e-VCC funds. Meanwhile, workflow from fund administration, custody and settlement would be simplified as most participants in the funds ecosystem will have a centralized platform to take on any lifecycle management activities and manage fund flows and communicate with investors and fund managers.
3. Has the eVCC been vetted by the MAS to be consistent with ss38-39 of the VCC Act?
Sections 38-39 of the VCC Act require a VCC to issue certificates for the allotment or transfer of shares. However, a VCC’s constitution can specify that share certificates will not be issued. As part of our e-VCC project, we have developed a template e-VCC constitution that includes digital provisions allowing for blockchain-based share registration while ensuring compliance with the VCC Act. One such provision states:
"The Company will not issue certificates in respect of Shares allotted and issued. Title to Shares shall be evidenced by an entry in the Register of Members kept on blockchain"
4. How does the cost of a tokenized VCC compare to a traditional fund structure?
The primary benefit of tokenization is operational efficiency, rather than immediate cost savings. By reducing paperwork, streamlining fund administration, and minimizing duplication of processes, blockchain-based VCCs optimize fund operations over time.
For example, while an e-payment system may not reduce transaction costs immediately, it significantly lowers reconciliation, accounting, and audit costs in the long run. Similarly, tokenized VCCs enable automated workflows, faster settlements, and better analytics, leading to long-term cost savings and improved decision-making.
Get Started with Your Tokenized VCC Today
InvestaX is the leading tokenization SaaS platform in Asia, licensed and regulated by the Monetary Authority of Singapore (MAS). We offer an end-to-end solution for tokenizing VCC funds.
- Download the Project e-VCC Report.
- Contact us to set up your tokenized VCC with expert guidance.