Recently the Cayman Islands, one of the most known offshores on Earth, announced the new regulation regime for digital asset business. This year individuals who seek to obtain a license for operating virtual assets in the Cayman Islands need to follow updated rules or the so-called VASP.
There are many companies that work with blockchain and cryptocurrencies on the islands now, and the numbers are only growing. For those who also look for registering a virtual asset company in the Cayman Islands and for businessmen interested in securities investment under this jurisdiction, this report will be especially useful.
The new legal requirements bring some new aspects of the regulation of crypto asset business and related services in the Cayman Islands. The goal of this amendment is to fight the money laundering tendencies.
Recently, the authorities of the Cayman Islands stated the new requirement about the public register of companies with the disclosure of beneficiaries. And now we will take a closer look at crypto assets.
Application of the regulation
Firstly, it is necessary to clarify who the new regulation will affect. It will not only apply to the providers of virtual asset services but additionally to companies who advertise themselves as such, despite not being technically able to perform activities like these.
The first step for the individuals interested in having a virtual asset provider license in the Cayman Islands is to apply for the registration with the CIMA. When the registration is done, the applicants must file a request to the regulator to receive permission for the virtual assets’ issue. By January 15th of each year, the registration has to be renewed.
In order to undergo the registration successfully, it is important to realize that the authorities take into account multiple factors before granting permission, for example, whether the company truly has enough technical employees, follows correct network security measures, and has a reliable accounting system. Furthermore, the applying company must necessarily have a registered office in the Cayman Islands.
Experts from COREDO follow thoroughly all the updates related to the registration procedure for businesses focused on digital assets in the Cayman Islands. If you are planning to start such company there, we will be happy to give you a consultation.
Candidates for a license
Secondly, we need to answer the question – who needs to obtain a license? The new rules do not apply to the companies that focus on transferring or exchanging crypto assets and only cover the providers and other mediators. For those who do not work with platforms and do not have their assets stored do not need to obtain a license. Even though it is still necessary for them to have a registration. When it comes to those who store assets, they must get a Cayman Virtual Asset Storage Provider license.
The authorities of the Cayman Islands came up with five new rules for monitoring local cryptocurrency exchanges and included them in the new bill that explains the registration procedure for companies working with digital currencies. Additionally, a few other countries proposed new cryptocurrency regulations in accordance with FATF outline, too.
Anti-money laundering regulations
The Cayman Islands are known for being one of the biggest tax heavens. It happened several times when the companies based on the Islands were engaged in corporate scandals and money laundering incidents. In order to prevent such situations, it is now necessary to follow international AML Rules to register a financial business there. These rules consist of keeping a list of high-risk customers, observing suspicious financial activity and reporting to the authorities.
The popularity of cryptocurrencies is growing immensely. That is why a lot of crypto investment funds want to register a company in the Caymans. In order to be able to operate an investment fund, it is a must for the company to be authorized and conduct its activities in compliance with the Mutual Funds Law.
The new regulation obliges the license holders to follow these requirements permanently:
- Perform AML audits regularly
- Submit the audited invoices to the regulator annually
- Choose the senior AML officials and employees
- Have permission to issue and transfer company shares.
It is fair to say, that many market actors are not content with the new regulation. However, from the general point of view, it will considerably increase the level of trust in companies focused on digital assets.
If you also plan to obtain a virtual asset operator license in the Cayman Islands, do not hesitate to get in touch with specialists from COREDO.