CAYMAN ISLANDS Law and Practice Contributed by: Peter Colegate, Marsha Williamson and Dean Bennett, Appleby
expect this to continue with more detailed published standards on technology governance and cybersecu- rity, more active examination of licensees, a progres- sively higher bar for new entrants, and more inspec- tions and enforcement. On cross-border non-compliance, CIMA’s Gate. io enforcement notice of April 2025 confirms that it regards its territorial jurisdiction seriously. 3. Licensing and Set-Up Requirements 3.1 Licensing Requirements The Two-Tier Framework The VASP Act establishes a two-tier authorisation framework. Registration is the baseline requirement for most regulated virtual asset activities: issuance, virtual asset exchange (both fiat-to-crypto and crypto- to-crypto), virtual asset transfer and participation in and provision of financial services related to an issu- ance. Licensing – a “virtual asset service licence” – is required for custody services and for operating virtual asset trading platforms. Registration Requirements A VASP registration applicant must satisfy CIMA that its business is operated and managed from the Cay- man Islands, that it has appropriate anti-money laun- dering and counter-terrorist financing and proliferation financing systems and controls in place, and that its beneficial owners, officers, directors and senior man- agement are fit and proper persons. The AML/CFT framework must comply with the Cayman Islands AML Regulations and CIMA’s AML/CFT guidance. A well- prepared, complete application with robust compli- ance infrastructure is likely to proceed more smoothly than one that is filed with the intention of developing compliance infrastructure post-registration. Licensing Requirements Virtual asset service licence applicants face addi- tional requirements. Licensees must demonstrate adequate regulatory capital, maintain segregated cli- ent asset arrangements, establish risk management frameworks, including stress testing and business continuity planning, satisfy technology and cyberse- curity standards, have in place adequate insurance
and comply with the enhanced disclosure and report- ing requirements introduced by the Custody/Platform Rule (as updated in February 2026). CIMA assesses the fitness and propriety of all significant controllers, directors, and senior management team members. Practical Considerations The VASP Act requires VASPs to have a registered office in the Cayman Islands and CIMA expects a genuine operational presence rather than a letterbox address. For firms seeking a licence, CIMA will assess the substance of the Cayman nexus. An independent director is required for licensees, but this appoint- ment does not need to be made locally in the Cayman Islands. Concurrent SIBA licensing may be required where the business involves investment management, securities dealing, or advising on securities in respect of virtual assets that also constitute securities. The interaction between the VASP Act and SIBA should be mapped at the outset of any Cayman authorisa- tion project. CIMA does have the discretion under the VASP Act to waive separate SIBA licensing in circum- stances where the activities in question are already captured by the VASP Act authorisation and duplica- tive regulation would serve no additional supervisory purpose. 3.2 Set-Up Requirements Entity Selection The starting point for any Cayman virtual asset busi- ness is entity selection. The Cayman exempted com- pany is the most widely used vehicle and remains the default choice for most VASP businesses: it is familiar to investors and banking partners, straightforward to administer and well supported by the Cayman profes- sional services infrastructure. An exempted company cannot carry on business in the domestic Cayman Islands market other than in furtherance of its offshore business, which aligns with the typical profile of a vir- tual asset business operating from Cayman but serv- ing a global client base. The Cayman foundation company – available under the Foundation Companies Act (2025 Revision) – has become an increasingly popular choice for protocol governance entities and DAOs. Its hybrid character- istics (capable of operating without members, with a defined purpose, and able to hold assets on behalf
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