CAYMAN ISLANDS Law and Practice Contributed by: Jason Ta, Gemma Walters, Paul Walters and Ben Magahy, Travers Thorp Alberga
Public issuances of virtual assets also require registra - tion under the VASP Act. Provision of the following virtual asset services requires licensing (as opposed to registration) under the VASP Act: • virtual asset custody service; and • operation of a virtual asset trading platform. A “virtual asset trading platform” means a digital plat - form: • which provides a virtual asset service and facili - tates the exchange of virtual assets for fiat curren - cy or other virtual assets on behalf of third parties for a fee, commission, spread or other benefit; and • which: (a) holds custody of or controls virtual assets on behalf of its clients to facilitate an exchange; or (b) purchases virtual assets from a seller when transactions or bids and offers are matched in order to sell them to a buyer, and includes its owner or operator, but does not include 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. In each case, a careful assessment of the activities undertaken by the cryptocurrency exchange will be required in order to determine the appropriate clas - sification for the purpose of the VASP Act. 6.4 Listing Standards In relation to virtual asset trading platforms, the authority has the ability under the VASP Act to impose requirements for the listing of virtual assets and has issued listing rules in the Rule – Obligations for the Provision of Virtual Asset Services – Virtual Asset Cus - todians and Virtual Asset Trading Platforms (Decem - ber 2024). Further, the VASP Act provides that a licensee that operates a virtual asset trading platform shall not allow a virtual asset to be traded on its platform unless it has assured itself that the virtual asset is not presented
in a deceiving manner or in a manner that is meant to defraud holders of funds or value. The licensee is also required to carry out reasonable due diligence on virtual assets and their issuers that are listed on the platform. 6.5 Order Handling Rules In the context of a virtual asset trading platform, there are no detailed order handling rules. What governs are general requirements concerning fair treatment of clients (including disclosure rules). In the case that a virtual asset service provider is a licensee under SIBA, it will be subject to various addi - tional rules under SIBA and the Statement of Guidance relating to Client Understanding, Suitability, Dealing and Disclosure for Securities Investment Business. The Securities Investment (Conduct of Business) Reg - ulations establish guidelines for interactions with cli - ents, necessitating that client agreements encompass specific details and mandating the issuance of a con - tract note to the client under certain post-transaction scenarios. The Statement of Guidance complements those Regulations by providing additional directives for client interactions, safeguarding client order prior - ity, prohibiting actions that may disadvantage client transactions, and enforcing fair and prompt allocation, along with timely and optimal execution. 6.6 Rise of Peer-to-Peer Trading Platforms Generally speaking, the VASP Act excludes platforms where parties trade in a peer-to-peer manner. None - theless, peer-to-peer trading platforms can impact traditional market participants in various ways, such as through: • reduced market share – increased access and ease of peer-to-peer trading could attract users away from traditional financial institutions and exchang - es; • new opportunities – traditional players could adapt by integrating peer-to-peer functionalities into their offerings or collaborating with such platforms; and • forced innovation – traditional players need to adapt and offer similar features or partner with P2P platforms to remain competitive.
132 CHAMBERS.COM
Powered by FlippingBook