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Registration of Virtual Asset Service Providers in the Cayman Islands
Although passed, the Law is not yet in force and provisions relating to different matters contained in the Law may be brought into effect at different times.
These laws form part of a regulatory framework to promote the development and use of innovative financial services (the “Framework”). The Cayman Islands Ministry of Financial services has stated that the Framework seeks to provide regulatory certainty and a solid foundation for legitimate financial services innovators who are operating in or from within the Cayman Islands, whilst also complying with emerging global standards surrounding virtual assets.
Relevant definitions used in the new Law are:
“virtual asset” means a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes but does not include a digital representation of fiat currencies.
“virtual asset service” means the issuance of virtual assets or the business of providing one or more of the following services or operations for or on behalf of a natural or legal person or legal arrangement:
- exchange between virtual assets and fiat currencies;
- exchange between one or more other forms of convertible virtual assets;
- transfer of virtual assets;
- virtual asset custody service; or
- participation in, and provision of, financial services related to a virtual asset issuance or the sale of a virtual asset.
- a company incorporated under the Companies Law (2020 Revision) (the “Companies Law”);
- a general partnership established under the Partnership Law (2013 Revision);
- a limited partnership registered under the Partnership Law (2013 Revision);
- an exempted limited partnership registered under the Exempted Limited Partnership Law (2020 Revision);
- a foreign company registered under Part IX of the Companies Law;
- a limited liability company formed and registered under the Limited Liability Companies Law (2020 Revision); or
- a limited liability partnership formed and registered under the Limited Liability Partnership Law, (2017 Revision),
- shall not issue virtual assets directly to members of the public in excess of the prescribed threshold (the “Threshold”) ; and
- shall, prior to issuing virtual assets, submit an issuance request to the Authority in the prescribed form and obtain the approval of the Authority prior to the issuance.
- the size, scope and complexity of the virtual asset service, underlying technology, method of delivery of the service and virtual asset utilized;
- the knowledge, expertise and experience of the applicant;
- the procedures that the applicant has in place to combat money laundering, terrorist financing and proliferation financing;
- the internal safeguards and data protection systems being utilized by the applicant;
- the similarity of the virtual asset service to securities investment business as defined under the SIBL or to any other regulated activity under any of the other regulatory laws;
- the risks that the virtual asset service may pose to existing clients, future clients, other licensees or to the financial system of the Cayman Islands;
- whether the virtual asset service business involves the offering of virtual asset custodial services or the operation of a virtual asset trading platform;
- the net worth, capital reserves and financial stability of the applicant;
- the impact that the virtual asset service may have on financial services in the Cayman Islands;
- the likelihood that the service will promote innovation, competition and benefits to consumers;
- except for an applicant that is a fintech service provider, the applicant’s ability to comply with the Law and the relevant requirements of the Anti-Money Laundering Regulations (2020 Revision);
- the applicant’s senior officers and trustees are fit and proper persons to hold the respective positions;
- the applicant’s beneficial owners are fit and proper persons to have such ownership or control; and
- the applicant has paid the assessment fee.