In this page, we explore the Cayman Islands cryptocurrency regulation for businesses, including the pricing and process to successfully register as a Cayman VASP.
The Cayman Islands are a British Overseas Territory located in the Caribbean sea, with the reputation of being a haven for turtles and an international center for offshore financial services.
After being crypto-neutral since the genesis of crypto assets, the Cayman Islands has issued a first framework in 2020, which simultaneously names the local Cayman Islands Monetary Authority (CIMA) as the governing body for everything related to crypto in the Islands, and voting a law on virtual assets service providers.
Crypto License in the Cayman Islands - General Information
What you need to know in 2024 about the crypto license in the Cayman Islands
The Virtual Assets Service Providers Regulations were put into effect in 2020. It was the first of two phases planned by the Cayman Islands Monetary Authority (CIMA), which acts as the financial regulator and central bank of the Cayman Islands. In this first phase, the CIMA implemented a legal framework for cryptocurrency businesses. The second phase was officially debuted in 2022, building up on the experience and knowledge of the first phase to create a license.
- Phase One (2020): VASP entities are now required to register as such and to enforce rules related to anti-money laundering, countering the financing of terrorism and other key areas of risks.
- Phase Two (2022): the Virtual Assets Service Providers Act has been enforced and crypto companies are now required to apply for a license issued by the CIMA.
In addition to the law dedicated to VASPs, the CIMA has updated the already existing Anti-Money Laundering Regulations, in order to formulate a compliance framework for crypto companies. A certain number of guidelines, rules and statements of guidance has also been issued by the regulator as means to regulate crypto in the Cayman Islands.
Cryptocurrency is not considered legal tender in the Cayman Islands.
Process and Timeline: Obtaining a Crypto License in the Cayman Islands
How to obtain the Cayman Islands crypto license in 2024 and what is the process
The process to obtain a crypto license in the Cayman Islands is demanding. The authorities are asking for a considerable amount of documents and verifications before agreeing to license a company.
The founding team and the managing team of the company will be checked by the regulator. They need to qualify as fit & proper and to demonstrate professional qualifications. The team should include an AML officer, whose duty is to enforce compliance with all the Cayman Islands laws and regulations.
Though there are no substance requirements, the company should have an office space in the Cayman Islands, where books are held physically. There are no minimum share capital requirements, but the regulator expects applicants to hold a capital that is coherent with their intended activities.
Once all the requirements are set and ready by the side of the applicant, the process is actually fairly quick: it takes 2 to 3 months in total to form a company and get the license, if everything is prepared and provided in due time.
The application can be prolonged by requests of the CIMA, asking for interviews, supporting pieces of information and clarification about the intended business activity.
Types of licenses in the Cayman Islands
Different crypto licenses in the Cayman Islands and covered activities
The Cayman Islands Monetary Authority issues a single Virtual Assets Service Providers license. There are nuances to note:
- A company can register for one or more of 6 activities;
- If the business model fails to qualify as one of the activities described in the law, or present an innovative idea, it is possible to apply for a sandbox license.
The activities listed by the Cayman Islands Monetary Authority are the following:
- 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;
- Participation in, and provision of, financial services related to a virtual asset issuance or the sale of a virtual asset;
- Fintech;
- Other activities.
Issuing cryptocurrencies and organizing an ICO is permitted in the Cayman Islands, provided that the issuing entity has first obtained an approval for the issuance of the virtual assets.
It stands noting as well that issuing security tokens is not permitted. A Cayman Islands VASP willing to issue security tokens can do so by requesting approval from the CIMA and by applying and obtaining a Securities Investment Business license from the CIMA.
It is possible to apply for a sandbox license, when the planned business activity isn’t described by the different possibilities laid out in the Virtual Assets Service Providers law. This license lasts for 12 months and allows for innovative services under the direct supervision of the CIMA. After 12 months, a definitive license can be issued.