CAYMAN ISLANDS Law and Practice Contributed by: Peter Colegate, Marsha Williamson and Dean Bennett, Appleby
chain, legal counsel should be obtained on the spe- cific circumstances. 1.1.4 Smart Contracts Smart contracts raise an interesting legal question in the Cayman context: not whether they can be enforced, but what happens when they execute in ways the parties did not intend. On the first question, the Cayman Islands has no specialist smart contract legislation, but the Electronic Transactions Act (as revised) (the ETA) provides that electronic records, electronic signatures, and contracts formed electroni- cally have the same legal effect as their paper equiva- lents. Provided the usual contractual requirements are met – offer, acceptance, consideration or deed and certainty, and intention to create legal relations – a smart contract is as enforceable as any other agree- ment. Interpretation of a smart contract is more complex. A deterministic smart contract executes its coded logic regardless of whether that logic faithfully reflects what either party intended. When the code and the par- ties’ underlying agreement diverge – whether through a bug, an unforeseen interaction, or an exploit – the question of what legal obligations arise is genuinely unsettled. 1.1.5 Industry and Trade Bodies The Blockchain Association of the Cayman Islands engages with government and CIMA on policy mat- ters, facilitates industry dialogue and promotes the use of blockchain-based solutions locally. Cayman Finance, the umbrella trade association for the Cayman financial services industry, has estab- lished a fintech committee that participates in inter- national policy discussions on digital assets, artificial intelligence, and related technologies. The Cayman Islands Virtual Assets Society, operating within the Cayman Enterprise City special economic zone environment, provides a community forum for businesses located within those zones. At the interna- tional level, Cayman-based firms participate in bodies including Global Digital Finance and the Crypto Coun- cil for Innovation, both of which engage with standard- setters at the Financial Action Task Force (FATF) on
matters of direct relevance to Cayman-based virtual asset businesses. 1.2 Crypto-Assets 1.2.1 Property Considerations A Settled Question: Digital Assets as Property The question of whether digital assets constitute prop- erty is now settled as a matter of English law and, in consequence, as a matter of Cayman law. The Prop- erty (Digital Assets etc) Act 2025 (c. 29) (the “UK 2025 Act”) received Royal Assent on 2 December 2025 and is immediately in force. That Act creates a statutory third category of personal property for things in digital form, distinct from traditional “things in possession” and “things in action”. It does not attempt to define exhaustively what falls within this third category – that task is left to the courts – but it removes the funda- mental doctrinal barrier that had previously prevented digital assets from being recognised as property at all under the traditional English common law binary. The growing body of unreported Cayman Grand Court decisions granting worldwide freezing orders, propri- etary injunctions, and Norwich Pharmacal disclosure orders against both identified and anonymous defend- ants in digital asset misappropriation cases now rests on a firmer doctrinal foundation. Transfer of Ownership As a matter of practical Cayman law, ownership of a crypto-asset transfers when the relevant blockchain transaction achieves irreversible confirmation under the applicable network consensus rules. Where assets are held through a custodian, the customer’s propri- etary rights depend on the terms of the custodial arrangement and the applicable trust analysis. Collateral The use of digital assets as collateral in Cayman- governed transactions is increasing and the legal framework for doing so is now more secure. A lender will typically have rights to control the collateral wal- let and, where tokens represent shares in a Cayman company, also take an equitable share mortgage over the underlying equity. The recognition of digital assets as property under the UK 2025 Act clarifies that an English or Cayman law security interest can be taken over digital assets as a matter of basic property law.
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