CAYMAN ISLANDS Law and Practice Contributed by: Jason Ta, Gemma Walters, Paul Walters and Ben Magahy, Travers Thorp Alberga
5. Payment Processors 5.1 Payment Processors’ Use of Payment Rails There are no specific prohibitions under Cayman Islands law on creating or implementing new payment rails. That being said, as further described in 5.2 Reg- ulation of Cross-Border Payments and Remittances , payment processing is likely to be a regulated activity requiring licensing and supervision by CIMA under the Money Services Act. A grant of such licence will be subject to such conditions and requirements as CIMA may require (including in relation to the payment rails intended to be used by the payment processor). 5.2 Regulation of Cross-Border Payments and Remittances Banks are involved in cross-border payments in the ordinary course, but in addition, the business of pro - viding cross-border payments services could consti - tute a “money services business” which is a regulated activity in the Cayman Islands pursuant to the Money Services Act. Money services business is defined as the business of providing any or all of the following services: • money transmission; • cheque cashing; • currency exchange; • the issuance, sale or redemption of money orders or traveller’s cheques; and such other services as the governor in the Cabinet may specify by notice published in the Gazette. 6. Marketplaces, Exchanges and Trading Platforms 6.1 Permissible Trading Platforms Section 4 (a)(i) of the Stock Exchange Company Act provides that the Cayman Islands Stock Exchange has the sole and exclusive right to operate one or more securities markets in the Cayman Islands. In contrast, operating (i) an exchange between vir - tual assets and fiat currencies or between one or more other forms of convertible virtual assets; or (ii) a
“virtual asset trading platform”, in or from within the Cayman Islands, is likely to be a virtual asset service requiring registration or licensing (respectively) under the VASP Act. 6.2 Regulation of Different Asset Classes Marketplaces, exchanges and trading platforms for securities versus virtual assets will be regulated in a different manner. A securities trading platform is likely to be regulated under SIBA – although careful consideration would need to be given to any such proposal as Section 4 (a)(i) of the Stock Exchange Company Act provides that the Cayman Islands Stock Exchange has the sole and exclusive right to operate securities markets in the Cayman Islands. In contrast, an exchange or trading platform for virtual assets is likely to be regulated under the VASP Act, whereas a platform that only provides a forum where sellers and buyers may post bids and offers and a forum where the parties trade in a separate platform or in a peer-to-peer manner, remains outside of the VASP Act. 6.3 Impact of the Emergence of Cryptocurrency Exchanges The VASP Act establishes a framework for regulating businesses providing virtual asset services (VASPs) in the Cayman Islands, including cryptocurrency exchanges. The business of providing one or more of the following services or operations for or on behalf of a customer requires registration (as opposed to licensing) under the VASP Act: • exchange between virtual assets and fiat curren - cies; • exchange between one or more other forms of convertible virtual assets; • transfer of virtual assets; and • participation in, and provision of, financial services related to a virtual asset issuance or the sale of a virtual asset.
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