CAYMAN ISLANDS Law and Practice Contributed by: Jason Ta, Gemma Walters, Paul Walters and Ben Magahy, Travers Thorp Alberga
4. Online Lenders 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities As a general matter, Cayman Islands law does not specifically regulate lending to individuals or other - wise, so there are no significant differences depending on the nature of the borrower. It is important to note that: (i) the provision of lend - ing business would likely fall within the scope of the AML Regulations as “relevant financial business” and would consequently result in AML/CFT obligations applicable to the lender; (ii) lending could be con - sidered a financing and leasing business under the economic substance regime of the Cayman Islands unless an exemption applies; and (iii) the jurisdiction does have laws regulating deposit-taking business (which could be used by some banking models as a source of funds for loans, see 4.3 Sources of Funds for Fiat Currency Loans for more detail). 4.2 Underwriting Processes The underwriting process itself is not currently dic - tated by regulation in the Cayman Islands, however underwriting may constitute participation in, or pro - vision of, financial services related to a virtual asset issuance or the sale of a virtual asset. Entities carrying on underwriting in or from within the Cayman Islands may therefore be carrying on a virtual asset service for which registration under the VASP Act is required. To the extent a lender is participating in underwriting under the laws of another jurisdiction, CIMA is likely to require such lender to be in compliance with the laws of such jurisdiction in relation to such underwriting. 4.3 Sources of Funds for Fiat Currency Loans The classic retail banking model of accepting deposits to fund lending is one of a number of different ways to raise funds. As there are no general prohibitions on the method a participant uses to fund its lending in the Cayman Islands, any method of raising capital could theoretically be possible (including through entering into or executing digital asset transactions, structured arrangements or more traditional financing methods).
P2P Lending Peer-to-peer lending is not currently regulated in the Cayman Islands. Lender-Raised Capital Borrowing through debt is not regulated in the Cay - man Islands, save that: (i) no invitation (whether direct - ly or indirectly) may be made to the public in the Cay - man Islands to subscribe for debt securities unless the debt securities are listed on the Cayman Islands Stock Exchange; and (ii) all Cayman Islands entities must comply with applicable sanctions regimes when receiving funds. Cayman Islands entities are also free to raise funds through issuing investment interests such as shares (in the case of a company) or membership or partner - ship interests (in the case of a limited liability company or exempted partnership), although Cayman Islands entities should take advice on whether such arrange - ments are caught by the Private Funds Act or Mutual The issuance of debt instruments (eg, bonds, notes and commercial paper) by a Cayman Islands entity is not a regulated activity in and of itself in the Cayman Islands. There are, however, other ancillary regulations which may apply including in relation to AML, data protection and sanctions. Deposit Taking Banking business in the Cayman Islands (which in summary is defined to mean the business of receiv - ing and holding on deposits or other similar account money which is repayable and may be invested by way of advances to customers or otherwise) is regu - lated in the Cayman Islands and may require a licence under the Banks and Trust Companies Act under the supervision of CIMA. 4.4 Syndication of Fiat Currency Loans At present, there is not a substantial market for the syndication of loans in the Cayman Islands, although as a general matter there is no regulation, prohibition or restrictions on loan syndication. The jurisdiction would welcome more syndication of loans in the future as more Cayman Islands lenders are established. Funds Act of the Cayman Islands. Capital Markets/Securitisations
130 CHAMBERS.COM
Powered by FlippingBook