Eternity Law International — News — VASP Regulation in Cayman Islands 2024

VASP Regulation in Cayman Islands 2024

Published:
August 20, 2024

A crypto-license in the Cayman Islands is an official documentary confirmation that makes it possible to legally engage in cryptocurrency business. Such a permit provides the right to exchange crypto-currencies, service crypto-wallets, accept crypto-payments and carry out other operations in this area. The body that decides whether the entrepreneur concerned will hold the above-mentioned permit or not is CIMA. This body operates in accordance with the VASP-Law, which came into force in 2020. Below we will analyze the main features of the regulatory framework for the crypto-environment of the Cayman Islands and the details of obtaining permission to conduct such activities.

Our team is professionals in the field of establishing and licensing commercial structures in hundreds of business areas. We have enormous experience and extensive expert knowledge, which gives us the opportunity to achieve only the best results for our clients. We also offer many ready-made companies for sale in Malta, Cyprus, Estonia, Spain and other countries.

Crypto-regulation in the Cayman Islands

A reliable legal framework has been created in these territories, which continues to be improved and stimulates the development of the crypto-industry in this jurisdiction. Let us examine in more detail the conditions for approval of a permit in this territory.

Cayman is renowned for its innovation in the crypto-sector, so for businesses operating or planning to work with virtual assets, the best solution is to get a permit in this jurisdiction. Special laws were introduced on the islands regulating the activities of crypto-businesses. The purpose of creating such a legislative framework is to attract investment and develop crypto-currency activities by encouraging startups, while not deviating from financial standards in relation to the parameters of transparency and honesty.

One of the main laws at the moment is the Service Providers Law, which has been in force since May 2020. This law includes two parts:

  • the first half of the law clearly outlines all the rules, the study of which is necessary for registration on the islands as a provider of crypto-services. This chapter also specifies all the provisions created to combat illicit circulation of funds;
  • by studying the second part of the law, the entrepreneur will be able to familiarize himself in detail with the issue, the features and basics of licensing and an explanation of all aspects that an investor may encounter during this process.

In the fall of the same year, the Rules for crypto-service providers were also published. It contains all the requirement ranges, as well as recommendations that service providers must comply with so that their activities comply with national laws that protect the interests of clients. All these rules must be followed by everyone involved in the exchange of virtual assets.

Also, in addition to complying with the above-mentioned laws and regulations, all crypto-service providers are now required to comply with the AML/CTF-requirements that came into force in February 2020 and the rules set out in the Anti-Trafficking Regulations and the Monetary Authority Guidelines. This jurisdiction has also become famous for its economic services sector and creation of a favorable environment for doing business-activities, which is why the islands are so popular in the areas of crypto-currency and blockchain.

Our team will provide you with comprehensive advisory and practical support in the implementation of crypto-licensing. We also offer professional assistance in obtaining EMI-licenses around the world. Our lawyers will become your reliable allies on this path.

VASP license in Cayman Islands: strengths of this jurisdiction

Among crypto-entrepreneurs, obtaining a license in this territory is a sign of reliability and compliance with all relevant provisions of the law. Due to growing demand and an increase in the number of people wishing to obtain a permit here, the government and regulatory authorities have to resort to different methods and methods to regulate the balance of virtual assets turnover and security.

To date, there is no specific list of rules and requirement lists that apply to digital currencies, but the Cayman Islands is moving towards this. The first steps in this direction were the following.

  1. Approval of regulation of laws to combat the illegal circulation of funds and KYC-policies. Businesses and service providers dealing with crypto-currency on the islands must screen each of their clients to determine whether they are involved in illegal activities.
  2. Amendments to the Mutual Funds Act to require all cryptocurrency-focused funds to be registered with the Cayman Islands Monetary Authority.
  3. Securities Act Statement: All offerings that fall within the category of securities described in the Act are subject to the same laws as the securities themselves.
  4. Instructions have also been published to be followed by enterprises operating on the islands and dealing with crypto-currency.

Rules for Virtual Assets Service Provider registration

The Cayman Islands attracts international crypto-investors and entrepreneurs due to its favorable regulatory environment, progressive laws and tax-incentives. Starting a crypto-business requires careful planning and compliance with local regulatory norms.

The first and foremost thing an entrepreneur should think about is understanding the legal framework of the jurisdiction. It is imperative to familiarize yourself with the Law on Virtual Assets and other regulatory documents related to crypto-activities. This will ensure a clear understanding of licensing provisions and aspects. Defining a business-model that adapts to Cayman’s market conditions and norms is also a key success factor. Entrepreneurs must clearly define the types of crypto-services offered, the target audience of interested consumers and monetization strategies.

You should be aware that running a crypto-business in the Caymans requires the mandatory establishment of a company in accordance with local legislation. The owner must draw up articles of incorporation and comply with all relevant registration rules.

Depending on the type of crypto-activity, one or more licenses may be required. The permit application process involves generating, collecting, and submitting detailed documentation demonstrating the organization’s compliance with established standards.

It is also necessary to draw up and implement effective mechanisms for compliance with AML/KYC policies. This is a prerequisite to ensure business-protection from risks.

Additionally, the potential permit holder needs to enter into and establish a banking relationship, which is critical to the efficiency of a crypto-business. You need to choose a banking institution that supports crypto-transactions and complies with internationally accepted security parameters.

Procedure for obtaining a crypto-license in Cayman

Running a crypto-business in the Cayman Islands requires in-depth knowledge of the regulatory framework and strict adherence to local regulations. However, the process for obtaining a crypto-permit in this jurisdiction is simple and straightforward.

  1. Determining the permit type. It is necessary to determine whether a particular business-project requires a general VASP-license, permission to exchange crypto-currencies, their storage, or other special permissions.
  2. Entrepreneurs need to register a firm locally and hire 1 director with residency.
  3. Preparation, collection, formation and submission of documents. This includes a business-plan, evidence of compliance with AML/CFT policies, information about key employees and founders, and a detailed description of internal procedures and security systems. It is important to ensure that all documents are presented clearly and completely to expedite the application process.
  4. Bringing the company into compliance with other registration parameters.
  5. Submitting an application to CIMA.
  6. Getting permission.

The process of obtaining a crypto-license in the Cayman Islands requires careful planning. Our lawyers will help you with this, and will also accompany you at every stage of this path. We also have ready-made options, in particular, a PSP-license in Hong Kong, China, Malta and other countries.

How much does a crypto-license cost in Cayman?

The price of this permit is calculated individually for each entrepreneur, since it depends on a number of related factors. Our specialists will provide you with a preliminary amount before the start of cooperation.

So, obtaining a crypto-permit in the Caymans has many third-party nuances and legal features, which require attention and the involvement of professionals. Our experts will become your reliable allies on the path of development and licensing. Contact us right now.

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