The Cayman Islands has passed a package of five bills to regulate Virtual Asset Service Providers (VASPS). The Virtual Asset Service Provider Law, the central piece of legislation in the regulatory framework, makes it mandatory for digital asset businesses to be registered with the Cayman Islands Monetary Authority (CIMA). The Honourable Financial Services Minister of the Cayman Islands, the Honourable Tara Rivers, stated that the new legislation aims to facilitate innovation in financial services, to provide regulatory certainty for VASPs, to protect consumers and to meet the requirements of the Financial Action Task Force (FATF) Recommendations.
Regarding the licensing of VASPs, prospective licensees must demonstrate that they have the necessary knowledge, experience, infrastructure and funding in line with the scope and complexity of the business. Licensed VASPs must also comply with anti-money laundering rules, prepare annual accounts and have a registered office in the Cayman Islands.
The new framework further includes a regulatory sandbox regime, which allows new innovative services to be offered with certain restrictions without the need for a full licence. The Honourable Minister explained that the sandbox licence allows CIMA to tailor restrictions, monitor covenants, set limits on the offering of the service or specify obligations “to allow it to adequately supervise an innovative activity which uses new technology”. The sandbox is intended to be for a limited timeframe and would allow the authority to assess the activity and whether legislative changes are required to existing laws.