Web3 Lawyer: The new investment trend in 2025, the potential and compliance challenges of AI crypto funds

As early as the end of 2023, "AI+" was one of the keywords in the Web3 mainstream track predictions of major well-known investment research institutions. Now, one year later, how is “AI+” doing?

Recently, a16z and VanEck respectively released 2025 Web3 predictions. These reports all pointed out the same topic: AI agent, the latest development direction of AI+. Among them, AI agency investment is represented, with outstanding results in the second half of 2024 - Ai16z, with a market value of US$80 million on the day of its release, and DAOS.FUN behind it, triggered a new trend in AI investment " AI Crypto Fund " ” (AI Crypto Fund).

This has also aroused the curiosity of Lawyer Mankiw. After all, Lawyer Mankiw has long recommended that crypto investors participate through crypto funds. Can the emergence of AI crypto funds bring a smarter investment path to crypto investors?

In this article, Lawyer Mankiw focuses on this topic and explores the new investment trend of AI crypto funds.

What is an AI crypto fund?

AI Crypto Fund, as the name suggests, the core logic is to use artificial intelligence (AI) to replace traditional manual management of new investment decision-making methods, which can realize the entire process of automated operations on the chain, from data analysis to decision execution, without human intervention. Unlike traditional crypto funds that rely on the experience and intuition of fund managers, AI crypto funds rely on algorithm models and on-chain data to achieve efficient and accurate investment strategies through real-time calculation and execution.

The AI ​​crypto fund can be realized thanks to the high degree of transparency and democracy of Web3:

First, as an infrastructure, blockchain provides rich and real real-time data for AI machine learning models, extracting patterns from on-chain transaction history, asset price fluctuations, and market sentiment. These data can help AI optimize investment strategies.

Secondly, the Decentralized Autonomous Organization (DAO) architecture provides a permissionless operating environment for AI crypto funds. The operation of AI crypto funds can achieve democratic governance and execution through smart contracts, further reducing subjectivity, operational risks and centralization issues caused by human intervention.

Precisely because of the characteristics of the underlying infrastructure, the advantages of AI crypto funds are more prominent than traditional crypto funds:

·Data processing capabilities. AI can analyze massive on-chain and off-chain data at high speed, accurately identify trends and make decisions. This processing speed and data scale far exceed human limits.

·Capture market sentiment. By analyzing social media, news and industry trends, AI can sense signals of market changes in advance and help funds make more accurate choices before trends occur.

·Autonomy and transparency. Relying on DAO and smart contracts, all operation records are put on the chain. AI can promote the transparency of fund investment and management and increase trust.

·Risk management capabilities. AI can not only conduct real-time monitoring, but also quickly adjust asset allocation according to market changes, which gives AI crypto funds an advantage when facing market fluctuations.

As more capital participates in Web3, investors' demand for efficiency, stability, and transparency has promoted the birth of AI crypto funds. The concept is good, but implementation is the key. So, what are the representative projects in this field?

What AI crypto funds are there?

Currently, exploration in the field of AI crypto funds has been fruitful. In addition to DAOS.FUN mentioned by Lawyer Mankiw at the beginning, there are also some AI crypto funds that have begun trials/operations.

1.Ai16z and DAOS.FUN

As a phenomenal AI crypto fund, Ai16z attracted the attention of the entire industry as soon as it was launched in the second half of 2024, successfully setting off the trend of AI crypto investment. The decentralized autonomous organization (DAO) behind Ai16z, DAOS.FUN, is the core technical supporter of the fund and achieves governance transparency and decision-making automation through smart contracts. Ai16z relies on advanced AI algorithms and on-chain data analysis capabilities to truly automate the entire process from strategy formulation to execution.

2. Yahctzee Fund

The Yahctzee Fund, backed by crypto luminary Arthur Hayes, is another high-profile autonomous AI-driven fund. It demonstrates excellent flexibility and adaptability in investment decisions through on-chain governance structure and high-performance AI algorithms. The goal of Yahctzee Fund is not only to optimize returns, but also to explore the optimization path of long-term asset allocation in an attempt to create a more sustainable investment model.

3.Sekoia Virtuals

Sekoia Virtuals is an experimental AI fund launched by Anand Iyer, managing partner of Canonical Ventures, focused on supporting the Virtuals ecosystem. Although the current market influence of this project is not large, its focus on Web3 small community investment management not only makes its differentiation advantages obvious, but also broadens more vertical fields and directions for the development of AI crypto funds.

4.Cod3x and BigTonyXBT

Cod3x is an organization focused on building the next generation of AI agent infrastructure. Its flagship project BigTonyXBT is an autonomous trader based on the Base chain. BigTonyXBT focuses on the DeFi field and gradually builds a complete ecology of AI crypto funds in financial investment through AI automatic trading and asset management functions.

The above projects have different focuses from technical implementation to ecological layout, and have comprehensively promoted the model innovation of crypto funds. However, while AI crypto funds are demonstrating their huge potential, whether they can achieve compliance in the increasingly clear global regulatory environment is also a key issue - compliance or not determines whether they can truly inject into the Web3 ecosystem. Sustainable growth drivers.

AI Crypto Fund Compliance Exploration

The emergence of AI crypto funds has undoubtedly brought innovation to the field of crypto investment, but whether this emerging model is compliant is still an open question. This mainly comes down to the peculiarities of AI crypto funds:

The first is the issue of legal subject. When a traditional fund is established, it must be approved by the jurisdiction and have a clear legal identity. However, most of the AI ​​crypto funds seen so far are often run based on DAO, and DAO is not clearly recognized as a legal subject in most countries. This means that if the AI ​​crypto fund is involved in asset custody, contract signing or legal disputes, the current legal framework may not be able to provide effective support. In some jurisdictions, unlicensed fund operations may be regarded as illegal fundraising, which makes AI crypto funds face greater legal risks when operating across borders.

Secondly, there is the issue of licensing and supervision. Existing financial market rules require fund managers to obtain relevant licenses and fulfill regulatory obligations, such as disclosing risks to investors and reporting fund performance regularly. However, AI crypto funds do not have a clear manager. Investment strategies and execution are completed by AI algorithms. How to define the identity of a "fund manager" is itself a compliance problem. In addition, this "unlicensed operation" model may be regarded as circumventing supervision, especially in regions with strict regulations on fund establishment and management, such as the United States and Europe, which will become a major obstacle to the compliance of AI crypto funds.

The third is the issue of governance transparency and algorithm compliance. Although the DAO structure provides technical support for on-chain transparent governance for AI crypto funds, this transparency is more for technology and communities rather than regulatory agencies. Traditional funds are required to disclose their investment strategies and governance structures to regulatory agencies, but the algorithms of AI crypto funds are complex and difficult to explain. There are still questions about whether regulatory agencies can accept such a "black box" operation. Especially in regions such as Europe that have clear requirements for algorithm transparency and explainability, AI crypto funds may face greater compliance pressure.

In addition, AI crypto funds usually serve the global market, but countries have inconsistent regulatory attitudes towards crypto assets and AI technology. For example, the U.S. Securities and Exchange Commission may treat it as an unregistered security, and in China, where all currency-related activities are explicitly prohibited, AI crypto funds may not be able to start business because they hit the bottom line of the policy. This inconsistency in regional regulation makes AI crypto funds face more compliance challenges when expanding their business.

In addition, when talking about AI, data privacy and cross-border are always core regulatory issues that cannot be avoided. At present, many countries and regions around the world have begun to establish AI-related regulatory bills. For example, the Ministry of Industry and Information Technology of China has decided to establish an Artificial Intelligence Standardization Technical Committee to be responsible for the revision of industry standards; Europe’s Artificial Intelligence Act (EU AI Act) is gradually advancing, aiming to In classifying the risk levels of AI applications and formulating strict transparency and data use requirements; the Blueprint for an AI Rights issued by the US White House (Blueprint for an AI Bill of Rights), although it is a principled guide, it also clearly puts forward the basic principles of algorithm transparency, user privacy protection and data abuse prevention. The gradual establishment of these regulatory rules will also impose stricter requirements on the compliance of AI crypto funds.

Mankiw Lawyer Summary

The emergence of AI crypto funds has brought a new imagination space to the field of crypto investment. Lawyer Mankiw believes that AI crypto funds are not only a technological innovation, but also a challenge to traditional financial logic. However, whether it is the legal status of DAO, the explainability of AI algorithms, or the diversity of the global regulatory environment, compliance is always the key to determining whether AI crypto funds can go mainstream.

Although there is still an obvious gap between the current traditional regulatory framework and new technologies, developers and investors should also do: not only proactively adapt to the existing legal framework, but also prepare for the future amid uncertainty. Be prepared for regulatory rules.

Lawyer Mankiw believes that only by seeking innovation in compliance and creating value in rules can AI crypto funds inject sustainable development momentum into the entire industry.