CAYMAN ISLANDS Law and Practice Contributed by: Jason Ta, Gemma Walters, Paul Walters and Ben Magahy, Travers Thorp Alberga
2.4 Variations Between the Regulation of Fintech and Legacy Players The underlying regulatory regime for fintech industry participants is substantially the same as it is for legacy players. 2.5 Regulatory Sandbox The Cayman Islands has not yet implemented a regu - latory sandbox. The VASP Act does provide a framework for CIMA to offer a time-limited (up to one year) regulatory sand - box licence for both virtual asset service providers and fintech companies, however these provisions have not yet commenced. We expect to see further develop - ments in this area over the next 12 months. 2.6 Jurisdiction of Regulators CIMA is the primary regulator in the Cayman Islands and has broad regulatory oversight of regulated enti - ties in the Cayman Islands. In performing this regulatory function, CIMA shall: • endeavour to promote and enhance market confi - dence, consumer protection and the reputation of the Cayman Islands as a financial centre; • endeavour to reduce the possibility of financial ser - vices business or relevant financial business being used for the purpose of money laundering or other crime; and • recognise the international character of financial services and markets and the necessity of main - taining the competitive position of the Cayman Islands, from the point of view of both consumers and suppliers of financial services, while conform - ing to internationally applied standards insofar as they are relevant and appropriate to the circum - stances of the Cayman Islands. In addition, the Department for International Tax Co- operation is a department of the Ministry of Financial Services and Commerce. It is responsible for admin - istering all of the Cayman Islands’ legal frameworks for international co-operation in tax matters, and for carrying out the functions of the Tax Information Authority, the Cayman Islands’ competent authority. The Tax Information Authority’s function is to collect
• International Tax Co-operation (Economic Sub - stance) Act;
• Mutual Funds Act; • Private Funds Act; • Proceeds of Crime Act;
• Securities Investment Business Act (SIBA); and • Virtual Asset (Service Providers) Act (the “VASP Act”). CIMA holds significant supervision powers within the financial services industry across a number of key aspects. • Regulation and supervision – CIMA’s primary role is to regulate and supervise the financial services sector in the Cayman Islands. It ensures compli - ance with relevant laws, regulations and interna - tional standards. • Monitoring compliance – CIMA monitors compli - ance with AML and CFT regulations. It oversees financial institutions’ adherence to these critical standards. • Currency management – CIMA manages the issuance and redemption of the Cayman Islands currency. It also oversees the management of cur - rency reserves. • Advisory role – CIMA provides advisory services to the Cayman Islands government on financial services regulatory matters. Its expertise informs policy decisions and regulatory frameworks. • Regulatory measures – CIMA issues regulatory handbook measures in the form of policies, proce - dures, rules and statements of principle and guid - ance. These measures set detailed standards and give guidance to industry on compliance. 2.3 Compensation Models There are no specific restrictions under Cayman Islands law on the compensation models that industry participants are allowed to use to charge customers. However, industry participants will need to comply with all applicable CIMA rules and regulations with respect to, amongst other things: client communica - tions, full and proper disclosure and treating clients fairly.
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