Cayman Islands crypto-asset service providers have one more week to register

Thursday, 21 January 2021
The Cayman Islands government brought its amended virtual asset service provider (VASP) legislation into force on 15 January under the Virtual Asset Service Providers (Amendment) Act, 2020 (the VASP Act), the Virtual Asset (Service Providers) (Amendment) Act, 2020 (Commencement) Order, 2021 and the Virtual Asset (Service Providers) (Savings and Transitional) Regulations, 2021.
Digital Assets

The VASP Act has introduced a special regulatory framework for VASPs, giving greater certainty and ensuring compliance with internationally recognised standards.

The legislation allows unlicensed firms already engaged in virtual asset services to continue operating, providing they register for a Cayman Islands Monetary Authority (CIMA) licence by 31 January 2021. Firms that already hold a CIMA licence granted under another authority must also notify CIMA of their intention to continue their business, and obtain an exemption by CIMA from the obligation to be licenced under the VASP Act.

Licensed VASPs will have to prepare accounts annually and make them available for inspection by CIMA; ensure that their senior officers, trustees and beneficial owners are 'fit and proper'; protect and secure their clients' personal data; ensure their communications relating to virtual assets are accurate and comply with anti-money laundering regulations.

They must also have a registered office in the Cayman Islands; provide documents and information required by CIMA and notify CIMA of any activities in another jurisdiction.

The legislation's definition of 'virtual assets' follows the wide definition used by the Financial Action Task Force. It will include all cryptocurrencies, security tokens, utility tokens and commodity or fiat-backed stablecoins.

VASPs that intend to issue virtual assets must submit a request to CIMA for approval, which will be subject to a threshold of fiat currency that may be raised through the issuance. Issues exceeding the threshold will need to be conducted through a licensed exchange, but the threshold has not yet been determined.

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