Overview of Crypto regulations

How are crypto service providers regulated in the Cayman Islands?

They are regulated as Virtual Asset Service Providers (VASPs) under the Virtual Assets (Service Providers) Law 2020. All VASPs must be registered, licensed or given a waiver by the Cayman Islands Monetary Authority (CIMA). 

According to CIMA (VASP FAQ),

The VASP Law applies to all entities that intend to or currently provide virtual asset services in or from within the Cayman Islands.

Virtual asset services as defined under the VASP Law 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 — (a) exchange between virtual assets and fiat currencies; (b) exchange between one or more other forms of convertible virtual assets; (c) transfer of virtual assets; (d) virtual asset custody service; or (e) participation in, and provision of, financial services related to a virtual asset issuance or the sale of a virtual asset. This includes issuers of virtual assets, virtual asset custodians, virtual asset trading platforms, as well as entities providing financial services related to the sale of a virtual asset such as virtual asset dealers.

"A new regulatory regime came into place on May 25, 2020 through the introduction of the Virtual Asset (Service Providers) Law 2020 making it mandatory for providers of “virtual asset service” to be licensed or registered. Under the law, “virtual asset service” is given a very broad definition(...)

The new licensing regime requires virtual asset service providers (VASPs) to maintain minimum standards, including having a registered office in the Cayman Islands and compliance with regulations such as the Cayman Islands AML/CFT regime and Data Protection Law. Other requirements are imposed on those offering virtual asset custody services or virtual asset trading platforms.

Depending on the nature of the virtual asset services to be provided, VASPs are required by the Cayman Islands Monetary Authority (CIMA) to be registered, licensed (whether under a virtual asset service licence or a sandbox licence) or operating under a waiver given by CIMA."

Source: Conyers, last revised on October 2020