CAYMAN ISLANDS Law and Practice Contributed by: Daniel Lee, Sophia Scott, Kimberly Robinson and James Turner, Maples Group
they maintain certain AML/CFT/CPF/sanctions policies and procedures, having regard to money laundering, terrorist or proliferation financing and sanctions risks and the size of the business. Virtual Assets in the Cayman Islands The Virtual Asset (Service Providers) Act (as amended, the “VASP Act”) provides the frame - work for the conduct of virtual asset services in the Cayman Islands and for the registration and licensing of entities that provide virtual asset services. The virtual asset service providers regime, which includes subsidiary and related regula - tory and financial services legislation (together, the “VASP Regime”), is being implemented in phases. The core phase one provisions of the VASP Act requiring registration came into effect on 31 October 2020. Related enforcement provi - sions and offences came into effect on 31 Janu - ary 2021 The VASP (Amendment) Act was published on 19 December 2024 and the legislation enacting Phase 2 of the VASP regime commenced on 1 April 2025. On this date, the licensing provisions of the VASP Act as well as the Virtual Asset (Ser - vice Providers)(Amendment) Act, 2024 and the Virtual Asset (Service Providers) (Amendment) Regulations, 2025 also came into force, along with CIMA’s Rule – Virtual Asset Custodians and Trading Platforms and Statement of Guidance – Virtual Asset Custodians and Trading Platforms, and the licensing component of CIMA’s Regula - tory Policy – Registration or Licensing of Virtual Asset Service Providers. The VASP (Amendment) Act provides the regula - tory basis for phase two of the Cayman Islands’ VASP Regime, which relates to the introduction
of a licencing regime for virtual asset trading platforms and virtual asset custodians. Specifically, a currently registered person who, at the commencement of the VASP (Amend - ment) Act, is engaged in the provision of virtual asset custody services or the operation of a virtual asset trading platform shall apply for a licence within 90 days of the commencement of the VASP (Amendment) Act. Additionally, the VASP (Amendment) Act intro - duces new operational requirements for all VASPs, including: • Directors: There must be at least three direc - tors, including one independent director. • Business Plan Changes: Prior written approv - al from CIMA is required for any changes to the approved business plan or to provide additional virtual asset services not included in the original application. • Litigation Notification: CIMA must be notified within 30 days of any litigation proceedings brought against them in any jurisdiction. • Fiat Currency: Fiat currency held on behalf of clients must be in a bank regulated by CIMA or another regulator in a non-high-risk juris - diction, ensuring segregation from the pro - vider’s own funds. • Misleading Representations: It is now an offence for VASPs to make or permit mislead - ing representations about their virtual asset activities. Cayman Islands Removed from FATF Grey List and EU AML List On 27 October 2023, the Financial Action Task Force (FATF) confirmed that the Cayman Islands had been removed from the FATF’s increased “monitoring list” (often referred to as the FATF Grey List). This decision came after the Cayman
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